Calculate the Incremental EPS for the Following Instrument: Convertible Bonds

question 54

Multiple Choice

Calculate the incremental EPS for the following instrument: Convertible bonds outstanding, yield of 5% and coupon rate of 5%
$2,000,000
Issue date
January 1, 2021
Maturity date
December 31, 2028
Conversion rate for each $1,000 bond
40 ordinary shares
Income tax rate
25%

• A)$0.94
• B)$0.75
• C)$0.31
• D)$0.25

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Definitions:

Dollar Price

The cost of a good, service, or security expressed in terms of the U.S. dollar.

Import

Goods or services brought into one country from another for sale.

Exchange Rate

The price of one country's currency in terms of another country's currency, affecting imports, exports, and international investment.

Dollar-Yen

Refers to the currency exchange rate between the U.S. dollar and the Japanese yen, indicating how many yen can be exchanged for one dollar.