Calculation of earnings per share*
Spriggins Company is a small biotechnology company specialising in the development of new varieties of vegetable and field crop seeds. One of the company's most successful products is the high-growth, thick-stalk bean which founder Jack Spriggins developed.
Like most fast-growing companies, Spriggins is capital-hungry. It pays no dividends on its 15 million issued (ordinary) shares, ploughing back all profits into the business. It issued A10 million of ten-year convertible zero coupon bonds at the start of x2. The bonds raised A5.584 million giving a yield to maturity of 6%. Under the conversion terms, each A1,000 bond can be converted at any time into 80 ordinary shares.
The company launched a share option scheme for employees in x3, and 1,350,000 options were granted on 1 May. The options can be exercised from x5 at a price of A8.
Spriggins reports net profit of A9 million in x3. Interest expense on the bonds is A0.355 million that year and the tax rate is 30%. The average market price of the company's shares in x3 is A10.
Required
Calculate the company's basic and diluted earnings per share for x3.