The Birch Corporation reported net earnings of $1,750,000 and there were 750,000 common shares outstanding in 2020. In addition, had the following items in its capital structure at December 31, 2020, the end of the fiscal year: a. Options to purchase 400,000 common shares were outstanding for the entire period. The exercise price is $17.50 per share. The average common share price during the period was $40. b. $3 million par value of 9% debentures (unsecured debt), outstanding for the entire year. Debentures are convertible into five common shares for each $100 bond. Interest expense of $285,000 was recognized during the year. c. Preferred shares, $5, cumulative, no-par, convertible into common shares at the rate of three shares of common for each one preferred share. Four thousand shares were outstanding for the entire year. No dividends were declared in 2020 on these shares. d. $8 million par value of 11.5% debentures (unsecured debt), outstanding for the entire year. Debentures are convertible into a total of 520,000 common shares. Interest expense of $660,000 was recognized during the year.

Required:

1. Calculate the basic eps for Birch in 2020. Round to the nearest cent. (3 marks) __________________

2. Calculate the individual (incremental) effect for diluted EPS for each of the four potentially dilutive securities. The tax rate is 35%. For options, calculate shares issued and shares retired. (8 marks) a. Incremental impact of Options:__________________

b. Incremental impact of 9% debentures:_______________

c. Incremental impact of preferred shares:____________________

d. Incremental impact of 11.5% debentures:_________________

3. Calculate the diluted EPS to be reported by Birch for 2020.Starting with basic EPS, adjust EPS by adding the most dilutive per share effects until the lowest EPS is obtained. Round to the nearest cent. (5 marks) ______________________________