Problem 2

Complicated, Inc. (Comp) has 4,260,500 shares outstanding at the beginning of 2015.In 2012, Comp issued convertible bonds with $1,000 par for $3 million.Their coupon interest rate was 3% which was the same as the market rate on the date of issuance.They are convertible at a rate of 20 shares of stock per bond.

In 2011, Comp began a stock based compensation program for its employees.The following took place in 2015 with regard to the program:

-350,000 options outstanding at the beginning of the year

-75,000 options exercised on May 1, for $50 per share

-500,000 shares of restricted stock outstanding at the beginning and end of the year

-200,000 shares vested and 300,000 shares unvested (value $50 per share) for the entire year

Other changes to equity- Comp paid 32,500,000 to repurchase shares at an average price of $65 (half on April 1 and half on Oct 1).The average price paid is comparable to the average price for the year.

Net income is $6,946,000 for 2015 and the tax rate is 30%.

Required:

1.Calculate basic earnings per share for 2015.

2.Calculate diluted earnings per share for 2015.