The following information pertains to the Chow Corporation for the fiscal year ended December 31, YR7:

Net Income for YR7 $1,200,000

8% convertible bonds issued at par ($1,000 per bond). Each bond is

convertible into 40 shares of common stock. $2,000,000

7% convertible bonds issued at par ($1,000 per bond). Each bond is

convertible into 15 shares of common stock. $1,500,000

6% convertible, cumulative preferred stock, $100 par value. Each share

is convertible into 3 shares of common stock. $3,000,000

Common stock, $10 par value $6,000,000

Stock options to purchase 50,000 shares of Common stock at $20 per share (options became fully vested in YR6)

Tax rate for YR7 40%

Average market price of common stock during YR7 $25 per share

The 8% convertible bonds were issued on Jan. 1, YR5.

The 7% convertible bonds were issued on Jan. 1, YR4.

The 6% convertible preferred stock was issued on July 1, YR5.

No dividends were declared in YR7. No other preferred stock was outstanding during YR7, other than those shares mentioned above. There were no changes during YR7 in the number of common shares outstanding. There are no shares of treasury stock.

Instructions: Calculate 1) Basic EPS, 2) the marginal effect (ME) on EPS of each potentially dilutive security, and 3) Diluted EPS.