Chocolate Factory's convertible debentures were issued at their $1,000 par value in 2011.At any time prior to maturity on February 1,2031,a debenture holder can exchange a bond for 25 shares of common stock.What is the conversion price,P_c?

Question

Quizplus · Accepted Answer

The conversion price (Pc) is calculated by dividing the par value of the debenture ($1,000) by the number of shares it can be converted into (25 shares). Thus, Pc = $1,000 / 25 = $40.00.

Chocolate Factory's Convertible Debentures Were Issued at Their $1,000 Par