Determine the increase in share premium issuance

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Question - On January 1, 2020, a corporation issued 1,000 P2,000 8% 6-year bonds at 103. Interest is payable annually every December 31. As of this date, the prevailing market rate of interest for similar bonds is 10%.

Each P2,000 bond comes with 25 nondetachable share warrants, which allows the bondholder to purchase 5 ordinary shares having a par value of P10, for P15.

Effective interest rate of bonds without share warrants is 9%, while the share warrants can be sold for P5 each.

Determine the increase in share premium issuance if 60% of the share warrants were exercised on December 31, 2021. Round present value factors to four decimal points.

Reference no: EM132969750

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