Smart Inc. issued P7,500,000 face amount of 12% convertible bonds at 110 on January 1, 2020, maturing on January 1, 2024 and paying interest semi-annually on January 1 and July 1. It is estimated that the bonds would sell only at 105 without the conversion feature. Each P1,000 bond is convertible into 10 ordinary shares with P100 par value. What is the increase in shareholders' equity arising from the original issuance of the convertible bonds? a. Zero b. P 150,000 c. P 375,000 d. P 750,000
Smart Inc. issued P7,500,000 face amount of 12% convertible bonds at 110 on January 1, 2020, maturing on January 1, 2024 and paying interest semi-annually on January 1 and July 1. It is estimated that the bonds would sell only at 105 without the conversion feature. Each P1,000 bond is convertible into 10 ordinary shares with P100 par value. What is the increase in shareholders' equity arising from the original issuance of the convertible bonds? a. Zero b. P 150,000 c. P 375,000 d. P 750,000
Chapter20: Financing With Derivatives
Section: Chapter Questions
Problem 4P
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Smart Inc. issued P7,500,000 face amount of 12% convertible bonds at 110 on January 1, 2020, maturing on January 1, 2024 and paying interest semi-annually on January 1 and July 1. It is estimated that the bonds would sell only at 105 without the conversion feature. Each P1,000 bond is convertible into 10 ordinary shares with P100 par value. What is the increase in shareholders' equity arising from the original issuance of the convertible bonds?
a. Zero
b. P 150,000
c. P 375,000
d. P 750,000
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