1. The most common approach to developing proforma financial statements is called the:
A. Cash Budget Method
B. Financial Planing method
C. Seasonality approach
D. Percent-of-sales method
E. Market-oriented approach
F. None of the above
2. Florence Inc. issued 8,000, 5-year convertible bonds of $2,000 each for $4,000,000 at the beginning of 2012. The bonds have a stated rate of interest of 9% and interest is payable annually. Each bond can be convertible into 100 shares with a par value of $10. The market rate of similar nonconvertible debt is 10%.
Determine the fair value of equity component using the “with-and-without” method.
$3,848,288
$1,365,688
$2,483,600
$151,712