Calculate the Incremental EPS for the Following Instrument: Convertible Bonds

question 9

Multiple Choice

Calculate the incremental EPS for the following instrument: Convertible bonds outstanding, yield of 6% and coupon rate of 6%
$3,500,000
Issue date
January 1, 2021
Maturity date
December 31, 2028
Conversion rate for each $1,000 bond
40 ordinary shares
Income tax rate
30%

• A)1.05
• B)1.88
• C)40,000
• D)3.15

---

Definitions:

Estimated Value

An approximation of the monetary worth of an asset, liability, or a business, determined through analysis or professional judgment.

Fixed Asset

Long-term tangible property owned by a business, used in its operations and not expected to be consumed or converted into cash in the short term.

Acquisition Cost

The total cost incurred to acquire an asset, including the purchase price and all other expenses necessary to bring the asset to its intended use.

Equipment

Tangible assets used in the operation of a business, such as machinery, computers, and furniture, which are not intended for sale.