Question
The Rockstar Corporation issued 10-year $900,000 par 6% convertible bonds on January 1, 2018 at 98. The bonds have a par value of $1,000 with
The Rockstar Corporation issued 10-year $900,000 par 6% convertible bonds on January 1, 2018 at 98. The bonds have a par value of $1,000 with interest payable annually. Each bond is convertible into 10 shares of common stock; in two years this ratio will increase, meaning that each bond will be convertible into 30 shares of common stock. Assume Rockstar uses straight-line amortization for its bonds and that its effective tax rate is 35%. Net income in 2018 is $2,600,000 and the firm had 1,000,000 shares of common stock outstanding during the entire year. Compute diluted EPS to the 4th decimal place.Please show all calculations
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