Question

The conversion price of CRX’s convertible ($1,000 par) subordinated debentures is $40 and the present market price of CRX common stock is $48. Determine the present conversion value of the convertible issue.

Answer 1

$1,200

Step-by-step explanation:

For this question, we use the unitary method that is shown below:

Given that

Conversion price = $1,000 par

And, the subordinated debentures is $40

And the present market price is $48

So, the present conversion value is

= Conversion price × the present market price ÷ the subordinated debentures

= $1,000 × $48 ÷ $40

= $1,200