A corporation has $125,000,000 of convertible bonds outstanding. The conversion price is $50. The corporation refunds $75,000,000 of the bonds for nonconvertible bonds. How many additional shares of common stock will be outstanding if the remaining bonds are converted?
After the refunding, $50,000,000 of convertible bonds will remain outstanding. If these bonds are converted, there will be an additional 1,000,000 shares of common stock outstanding ($50,000,000 of bonds divided by the conversion price of $50 equals 1,000,000 shares of common stock). (6-6)