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. A company currently has a debt-to-equity ratio of 1.25. Common shareholders equity is$4,000,000, consisting of 1.5 million shares outstanding with a current price of
. A company currently has a debt-to-equity ratio of 1.25. Common shareholders equity is$4,000,000, consisting of 1.5 million shares outstanding with a current price of $28/share.Part of the companys debt currently outstanding is $1,000,000 of convertible bonds.Each $1,000 par value bond can be converted into 50 common shares at any time duringthe next three years. The coupon rate on the bonds is 6 percent with interest paidannually. If all convertible bonds are converted, the companys debt-capital ratio isclosest to:
A. 42.5%.
B. 44.4%.
C. 80.0%.
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