Calculate the Incremental EPS for the Following Instrument: Convertible Bonds

question 51

Multiple Choice

Calculate 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)$0.75
• B)$0.88
• C)$2.25
• D)$2.63

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Definitions:

Thoracic Duct

The largest lymphatic vessel in the body, which drains lymph from the lower half of the body and the left upper part into the bloodstream.

Lymphatic Duct

A large vessel in the lymphatic system that drains lymph from the lymphatic vessels into the venous system.

Vena Cavae

The two major veins (superior vena cava and inferior vena cava) that carry deoxygenated blood from the body back to the heart.

Cisterna Chyli

A dilated sac at the lower end of the thoracic duct into which lymph from the intestinal trunk and two lumbar lymphatic trunks flows.