A) RST Inc. must decide whether to obtain $1 million of financing by selling common stock...

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A) RST Inc. must decide whether to obtain $1 million of financing by selling common stock at its current price of $40 per share or selling convertible bonds. The firm currently has 250,000 shares of common stock outstanding. Convertible bonds can be sold for their $1,000 par value and would be convertible at $45 per share of common stock. The firm expects its earnings available to common shareholders to be $700,000 each year over the next several years. Calculate the following: a) the number of shares the firm would need to sell to raise the $1 million. b) the earnings per share (EPS) resulting from the sale of common stock. c) the number of shares outstanding once all bonds have been converted. d) EPS associated with the bond financing after conversion And discuss which of the financing alternatives you would recommend. A) RST Inc. must decide whether to obtain $1 million of financing by selling common stock at its current price of $40 per share or selling convertible bonds. The firm currently has 250,000 shares of common stock outstanding. Convertible bonds can be sold for their $1,000 par value and would be convertible at $45 per share of common stock. The firm expects its earnings available to common shareholders to be $700,000 each year over the next several years. Calculate the following: a) the number of shares the firm would need to sell to raise the $1 million. b) the earnings per share (EPS) resulting from the sale of common stock. c) the number of shares outstanding once all bonds have been converted. d) EPS associated with the bond financing after conversion And discuss which of the financing alternatives you would recommend.

Answer rating: 100% (QA)

Lets calculate each of the parts step by step a Number of shares the firm would need to sell to rais... View the full answer