The following data are presented by Quentin Corp. for calendar 2020 Net income of the year $ 4,500,000 Capital structure (December 31, 2020) 8% convertible bonds; convertible into 105,000 common shares $ 7,500,000 $7, cumulative preferred shares, 16,000 shares out standing, Each convertible into two common shares $ 1,600,000 360,000 call options exercisable at $ 25 per share Common shares outstanding, 1,000,000 shares

Additional information

1. The common and the convertible preferred shares were outstanding from the beginning of the year. The convertible bonds were issued on April 1, 2020.

2. The average market price of the common shares in 2020 was $ 30. The stock price was $ 27 on January 1, 2020, and $ 35 on December 31, 2020.

4. The convertible bonds were sold at par.

5. The income tax rate for 2020 is 25%. Instructions

a) Calculate basic EPS.

b) Calculate diluted EPS, use the four-step approach.