Convertible perfereed stock
Valerian Corp. convertible perfereed stock has a fixed conversion rate of 7 common share per 1 share of perfered stock. The perfered stock pays a dividiend of $8.00 per share per year. The common stock sells$15.00 per share and pay a dividend of $1.00 share per year.
a. Judging on the basis of the conversion ratio and the price of common shares, which is the current version value of each preferred share?
B. If the preferred shares are selling at $104.00 each, should the investor convert the preferred shares to common shares?
c. What factors might cause the an investor not to convert from preferred to common stock?