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Determine the fair value of liability component

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Question: 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 liability component using the with-and-without method.

Reference no: EM131759311

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