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Posted on Jul 26, 2024

5. A convertible bond is currently selling for $855. It is convertible into 15 shares of common stock that presently sell for $52 per share.

a) calculate the conversion value.

b) calculate the conversion premium.

c) if the annual interest expense for the convertible bonds was 550,000, and the company's tax rate was 21% by how much would the aftertax earnings increase after the bonds convert to common stock?

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