Convertible preferred stock: Valerian Corp. convertible preferred stock has a fixed conversion ratio of five common shares per one share of preferred stock. The preferred stock pays a dividend of $10.00 per share per year. The common stock currently sells for $20.00 per share and pays a dividend of $1.00 per share per year.

a.On the basis of the conversion ratio and the price of the common shares, what is the current conversion value each preferred share?

b. If the preferred shares are selling at $96.00 each, should an investor convert the preferred shared to common shares?

c. What factor might cause an investor not to convert from preferred to commons sock?

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