Company expects its growth rate to be high

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Reference no: EM131992695

Convertible preferred dividend $2.10

Common stock $42.00

Conversion 1.00

Coversion premium 10%

Conversion price with 10% premium $46.20.

Conversion price 30%

Conversion price with 30% is $54.60.

a. If the company expects its growth rate to be high, would it be better to use a premium of 10% or a 30%? Why?

b. If the company expects its growth rate to be low, would it be better to use a premium of 10% or a 30%? Why?

Reference no: EM131992695

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