Horace Corporation has $200,000 of convertible 5% bonds. Each $500 bond is conve

Question

Horace Corporation has $200,000 of convertible 5% bonds. Each $500 bond is convertible into 50 shares of common stock. The bonds were sold at par and are currently trading at par, and the required return on nonconvertible bonds of similar risk is 11%. Common stock is trading at $ 23 per share. The total leverage ratio of a company will: increase if operating leases are capitalized increase if a company sells its receivables increase if a company sells more equity increase if a company pays suppliers more quickly

Explanation / Answer

increase if a company sells more equity

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