Froblem3

Converson vglue ConversiOn rdtio x stock prke lcs)

5 $ 20
$O0 is he value of 5 comnun shorS if 1 preferred
StoCk is cwnverted.

annual
. Total earning ps Dividend per sinare t stock prMe

Tctal earning per shae Stock pmce) x nvegion aHE

annugl d1udend
( 20 x5) (¢1x5)
+

$100 + 5
405
No teysh ould not convert peferred sto ck to comimon stock. ey NU Cui

$1 more i total eurnings if they netain petered stoCks

 be nluctdnt to sTOK tO Cm mon stuck
coNevf pre fevred
f
Tno inyestor Watl PS . Sjmtar to
nceved in we Cs dre
less than hose i
the dividen ds
to be
to $10 dividendc f PS
diidends on Cs s olu$1 Comoared
the probleim,

7Fiyon C
E rato/yE PS

Firm C

MOvket Pice per chaie of common stocl Ratto x EPS

= PiE
1 x1.8
2a. G8