What is the conversion price

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Reference no: EM13105770

The common stock of the dray-bar corporation gets $4 per share has a dividend pay-out of three forth and sells at a P/E ratio of 20. Dray-bar wishes to proposal $20 million of 15 percent. 25 year convertible debentures with an preliminary conversion premium of 25 percent and a call price of 110. Dray-bar currently has 1 million common shares outstanding and has a 60 percent tax rate.
1) What is the conversion price?
2) What is the conversion ratio per $1,000 debenture?
3) What is the initial conversion value of each debenture?
4) How many new share of common must be issued if all debenture are converted?
5) If Dray-bar can increase issue, calculate the new earnings per share and earnings retained before and after conversion.

Reference no: EM13105770

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