Calculate the incremental EPS for the following instrument: $\begin{array}{|l|r|}
\hline\begin{array}{l}
\text { Convertible bonds outstanding, effective yield } \
\text { of } 7 \% \text { and coupon rate of } 6 \%
\end{array} & \$ 2,000,000 \
\hline \text { Issue date } & \text { January 1, 2019 } \
\hline \text { Maturity date } & \text { December 31, 2018 } \
\hline \text { Conversion rate for each } \$ 1,000 \text { bond } & \text { 20 ordinary share } \
\hline \text { Income tax rate } & 25 \%\\hline
\end{array}$
A)0.75
B)0.88
C)2.25
D)2.63

Question

Quizplus · Accepted Answer

Incremental EPS = (Interest expense - Interest income) * (1 - Tax rate) / Number of shares= (2,000,000 * 0.07 - 2,000,000 * 0.06) * (1 - 0.25) / (2,000,000 * 20)= (140,000 - 120,000) * 0.75 / 40,000,000= 20,000 * 0.75 / 40,000,000= 2.63

Calculate the Incremental EPS for the Following Instrument A)075 B)0

Calculate the Incremental EPS for the Following Instrument A)075
B)0