Calculate the Income Effect on the Incremental EPS for the Following

question 65

Multiple Choice

Calculate the income effect on the incremental EPS for the following instrument: Convertible bonds outstanding, effective yield of 7% and coupon rate of 7%
$2,000,000
Issue date
January 1, 2021
Maturity date
December 31, 2024
Conversion rate for each $1,000 bond
20 ordinary shares
Income tax rate
25%

• A)$30,000
• B)$35,000
• C)$90,000
• D)$105,000

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Definitions:

Reciprocity Norm

A social norm that involves an expectation that people will respond to each other in kind, returning benefits for benefits.

Social Influence

The effect that the words, actions, or mere presence of other people have on our thoughts, feelings, attitudes, or behavior.

Robert Cialdini

A psychologist recognized for their contributions to understanding persuasion, adherence, and negotiating practices.

Foot-in-the-Door Technique

A persuasion strategy where a small request is made first to increase the likelihood of compliance with a larger request later.