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

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Definitions:

Carbon Dioxide

A colorless, odorless gas produced by burning carbon and organic compounds and by respiration, considered a major contributor to climate change.

Sea Levels

The average height of the ocean's surface between the high and low tide, used as a standard in measuring land elevation and ocean depth.

Global Warming

The long-term rise in Earth’s average temperature, largely attributed to human activities, especially the emission of greenhouse gases.

Carbon Dioxide

A colorless, odorless gas produced by burning carbon and organic compounds and by respiration. It is naturally present in air and is absorbed by plants in photosynthesis.