The following summarized information is available in relation to ABC Ltd, a publicly listed company:

1. Profit for the years ended 31 December: 2001 and 2002. Profit for the year $ 3,750,000 and $ 4,550,000

2. On 1 January 2001, ABC had $5 million of $0.25 ordinary shares in issue.

3. On 1 April 2001, ABC underwent a one-for-five rights issue at an exercise price of $1.20. The market price of ABCs share immediately before the exercise on 1 July 2001 was $1.50.

4. On 1 April 2002, ABC issued $4 million 10% convertible loan stock 2024. The terms of conversion are 50 ordinary shares in exchange for each $100 of loan stock. Assume an income tax rate of 20%.

5. On 1 October 2002, the directors of ABC Ltd were granted options to buy 2 million shares in the company for $1.50 each for a period of five years. The average market price of ABCs share for the year ended 31 December 2002 was $2 each. No options were exercised in 2002.

REQUIRED: (a) Calculate the basic and diluted earnings per share for the years ended 2001 and 2002. (25 marks) (b) What do the earnings per share ratios calculated in (a) indicate about the performance of ABC Ltd in 2001 and 2002?