Calculate the Income Effect on the Incremental EPS for the Following

question 29

Multiple Choice

Calculate the income effect on the incremental EPS for the following instrument: $$\begin{array}{l}\begin{array} { |l | r| } \hline \text { Convertible bonds outstanding, yield of } 6 \% \text { and }\\\text { Ioupon rate of } 6 \% & \$ 2,000,000 \\\hline \text { Issue date } & \text { January } 1,2015 \\\hline \text { Maturity date } & \text { December } 31,2018 \\\hline \text { Conversion rate for each } \$ 1,000 \text { bond } & \text { 20 ordinary shares } \\\hline \text { Income tax rate } & 25 \% \\\hline\end{array}\end{array}$$

• A)0.75
• B)2.25
• C)40,000
• D)90,000

Apply principles of sequences and series to real-world problems.

Understand the concept and computation of partial sums in geometric sequences.

Apply knowledge of financial mathematics to calculate annuity balances and total payouts.

Apply the binomial theorem and Pascal's triangle to solve binomial expansion problems.

---

Definitions:

Multinational Corporation

A large company that operates and has assets in several countries, beyond its home country.

Crayola Inc.

A company known for its wide range of art supplies, particularly crayons, catering to both educational and recreational uses.

Smartphone Company

A company that specializes in the development, manufacturing, and marketing of smartphones and related services.

Micro-multinational Corporation

A small company that operates in multiple countries, leveraging the advantages of international markets despite its size.