1 January Shares in issue 1,000,000Profit for the year ended 31 December $200,00031 March Company issues $200,000 6% convertible bonds Terms of conversion:100 shares/$100 if within five years110 shares/$100 if after five yearsAn equivalent loan without the conversion rights would have required an interest rate of 8%.The company’s tax rate is 33%Basic EPS: $200,000/1,000,000 = $0.20

Example 6 Diluted EPS – Convertible BondsConvertible bonds1 January Shares in issue 1,000,000Profit for the year ended 31 December $200,00031 March Company issues $200,000 6% convertible bonds Terms of conversion:100 shares/$100 if within five years110 shares/$100 if after five yearsAn equivalent loan without the conversion rights would have required an interest rate of 8%.The company’s tax rate is 33%Basic EPS: $200,000/1,000,000 = $0.20Required:Calculate diluted EPS.

A convertible bond has a current market value of $1,075 and its par value is $1,000.  The conversion ratio is 80 shares and the stocks of the issuing company are currently trading at $15 per share.  The bond has:Question 2Select one:a.a conversion discount of $200b.a conversion premium of $125c.a conversion premium of $200d.a conversion discount of $125

A corporation issued convertible bonds with a par value of $1,000. The corporation’s stock is selling at $38.00 per share, and the current market price of the convertible bonds is $1,050. If the conversion ratio is 25, what will be the conversion price?

A company issues $400,000 of 8%, 10-year bonds dated January 1. The bonds pay interest semiannually on June 30 and December 31 each year. If bonds are sold at par value, the issuer records the sale with a (debit/credit)

Assuming the conversion value after seven years is $126.15, what is the current market value of the 8% loan notes of Par Co?