Question $4$: Earnings per Share $(15$ marks$)$

On January $1,2019,$ Warren Corporation had $1,000,000$ ordinary shares outstanding. On

March $1,$ the corporation issued $150,000$ new shares to raise additional capital. On June $30,$

the corporation declared and issued a $2-$for$-1$ share split. On November $1,$ the corporation

purchased on the market $600,000$ of its own outstanding shares and retired them.

Warren also has issued $30,000$ options on July $1,2019$ to the employees to buy ordinary shares

at $$40$ a share. The market price of the ordinary shares averaged $$45$ during $2019$ ; averaged

$$50$ from July $1$ till the end of the year of $2019$; and averaged $$35$ from Jan $1$ till June $30$ of

$2019.$

During $2019,$ there were $40,000$ shares of cumulative convertible preference shares

outstanding. Warren pays $$3\mathrm{.}50$ dividend for each preference share each year, and each

preference share is convertible into three ordinary shares $($un$-$adjusted for split$).$

Warren issued $$2,000,000$ of $8\%$ convertible bonds at face value during $2018.$ Each $$1,000$

bond is convertible into $30$ ordinary shares $($un$-$adjusted for split$).$ On Oct $1$ of $2019,60\%$ of

the convertible bonds were converted into $72,000$ ordinary shares $($after the adjustment for the

stock split$).$

Warren had $$5,000,000$ net income in $2019.$ The tax rate is $40\%.$

Required:

Compute Basic EPS and diluted EPS for $2019($rounded to the nearest two decimal points$).$