Use the Following Information for Questions 12 and 13

question 5

Multiple Choice

Use the following information for questions 12 and 13
Florence Inc. issued 8,000, 5-year convertible bonds of $2,000 each for $4,000,000 at the beginning of 2012. The bonds have a stated rate of interest of 9% and interest is payable annually. Each bond can be convertible into 100 shares with a par value of $10. The market rate of similar nonconvertible debt is 10%.
-Determine the fair value of equity component using the "with-and-without" method.

• A) $3,848,288
• B) $2,483,600
• C) $1,365,688
• D) $ 151,712