Sheridan Company issued 8800, 6-year convertible bonds of $2,000 each for $3850000 at the beginning of 2018. The bonds have a stated rate of interest of 8% and interest is payable annually. Each bond can be convertible into 100 shares with a par value of $10. The market rate of similar nonconvertible debt is 9%. Determine the fair value of the equity component using the with-and-without method is: