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Calculate the Share Effect on the Incremental EPS for the Following

question 93

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Calculate the share effect on the incremental EPS for the following instrument:  Convertible bonds outstanding, yield of 5% and  coupon rate of 5%$2,000,000 Issue date  January 1,2013 Maturity date  December 31,2020 Conversion rate for each $1,000 bond 40 ordinary shares  Income tax rate 25%\begin{array}{l}\begin{array} {| l | r |} \hline \text { Convertible bonds outstanding, yield of } 5 \% \text { and }\\\text { coupon rate of } 5 \% & \$ 2,000,000 \\\hline \text { Issue date } & \text { January } 1,2013 \\\hline \text { Maturity date } & \text { December } 31,2020 \\\hline \text { Conversion rate for each } \$ 1,000 \text { bond } & 40 \text { ordinary shares } \\\hline \text { Income tax rate } & 25 \% \\\hline\end{array}\end{array}

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Definitions:

Principle of Neutrality

The concept that certain measures, such as fiscal policies, should be designed to have a neutral effect on economic choices and competition.

Economic Decisions

Choices made by individuals, businesses, or governments regarding the allocation of scarce resources to satisfy needs and desires.

Excess Burden

The loss of economic efficiency that occurs when a tax or government policy distorts consumer behavior or market outcomes, leading to a decrease in total welfare.

Tax Revenue

The financial gains obtained by governments from tax collection.

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