Calculate the Income Effect on the Incremental EPS for the Following

question 74

Multiple Choice

Calculate the income effect on the incremental EPS for the following instrument: $$\begin{array}{l}\begin{array} { | l | r | } \hline \text { Convertible bonds outstanding, yield of } 8 \% \text { and }\\\text { coupon rate of } 8 \% & \$ 5,000,000 \\\hline \text { Issue date } & \text { January } 1,2015 \\\hline \text { Maturity date } & \text { December } 31,2022 \\\hline \text { Conversion rate for each } \$ 1,000 \text { bond } & \text { 25 ordinary shares } \\\hline \text { Income tax rate } & 30 \% \\\hline\end{array}\end{array}$$

• A)$0.96
• B)$2.24
• C)$120,000
• D)$280,000

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Definitions:

Between-treatments Variation

The differences in group means in an experiment that are attributed to the effect of the independent variable.

Sum Squares Treatments (SST)

A measure in statistical analysis used to quantify the variability among different treatment groups within an experiment.

Criterion

A standard or rule by which something can be judged or measured.

Factor

An element or constituent that contributes to a particular result or situation.