Business, 27.08.2021 04:50 xolocsin

A firm requires $5 million in new long-term financing. The firm is trying to decide whether to sell common stock or a convertible bond. The market price of the common stock is currently $65 per share. In order to sell this new issue, the company would have to underprice the stock by $2 and would have to sell it for $63 per share. At present, the firm has 600,000 shares of common stock outstanding. The firm could also issue 20-year, 10 percent, and $1,000 par-value convertible bonds. They would set the conversion price at $73 per share, and the bond could be sold at par. The earnings for the firm should be $4,000,000 in the coming year. If the firm chooses the convertible bond, what will the earnings per share be after all bonds are converted

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A firm requires $5 million in new long-term financing. The firm is trying to decide whether to sell...

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