Reference no: EM133039749

Question - Hominem Inc has 100,000 common shares outstanding. Earnings from continuing operations amounted to $1,720,000 (after tax) for the year ended 31 December 20X4. Hominems income tax rate is 25%, The company had no discontinued operations. At the end of 20X4 the market price o the company's common shares was $38. Hominem had these additional components in its capital structure at the end of the year

-15,000 cumulative preferred shares outstanding since 20X2: each share is entitled to an annual dividend of $10 per share and is convertible into five shares of common after 30 June 20X9. 

-4% debentures amounting to $720,000 were issued on 1 January 20X4. Οn this issue date, the bonds were recorded at $645,000. The debentures are convertible into 10 shares per $1000. On 1 January 20X4 similar bonds with no conversion options had a market yield of 12% Interest is payable annually. 

-Outstanding options permitting the holder to buy 5,000 common shares in 20X6 or later for $46 per share.

Required -

1. Compute basic EPS.

2. Compute diluted EPS, using a cascade appropriate.