Valerian Corp. convertible preferred stock has a fixed conversion ratio of 5 common shares per 1 share

Question:

Valerian Corp. convertible preferred stock has a fixed conversion ratio of 5 common shares per 1 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. Judging on the basis of the conversion ratio and the price of the common shares, what is the current conversion value of each preferred share?

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

c. What factors might cause an investor not to convert from preferred to common stock?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...