Additional information: There are 500,000 shares of $20 par 5% cumulative preferred stock outstanding. There are 3 million shares of common stock outstanding. The balances of outstanding preferred and common shares are expected to remain consistent without considering the issuance at hand. Earnings before interest, issue expenses, and taxes is $12 million with an expected increase of 5% year over year. The stock price is $11 per share and is expected to increase 4.5% year over year. The tax rate for all years is 21%.

Issuance 2 Convertible Bond Issue Issue $29 million in 10-year convertible bonds with a stated rate of 2.75% and conversion price of $200. Interest is paid semi-annually, the issue price is expected to be $30,345,000 million, and the underwriter will charge $345,000 to take the issue to market. The journal entry at issuance would be:

DR Cash 30,000,000

DR Unamortized BIC 345,000

CR Premium on B/P 1,345,000

CR Bonds Payable 29,000,000