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Calculate the conversion ratio of the convertible

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Reference no: EM132801876

Sapporo Corp. has issued RM20 millions of RM1000 par value, 12 percent annual convertible debenture that matures in 10 years. The conversion price of the convertible is RM50.00. The yield of the comparable debt s without conversion feature is 14 percent and the price of the issuing firm's common stock is RM42.00 per share. The convertible is currently selling for RM990.00.

a. Calculate the conversion ratio of the convertible.

b. Calculate the conversion value of the convertible.

c. Calculate the straight bond value of the convertible.

d. Calculate the conversion premium of the convertible in absolute ringgit and percentage.

e. Assume that the company's operating profit is RM12 million and the number of common stock outstanding is RM12 million shares. Show the effect on EPS (earnings per share) before and after conversion of the convertibles. Assuming that Corporate tax is 30 percent.

Reference no: EM132801876

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