19.1 On January 1, 2025, ABC Company issued its 12%. 5-year convertible debt instrument with a face amount of P4,000,000 for P3,850,000. Interest is payable every June 30 and December 31 starting 2025. The debt instrument is convertible into 20,000 ordinary shares with a par value of P100. When the debt instruments were issued, the prevailing market rate of interest for similar debt without conversion option is 14%. ABC uses an effective interest method of amortization and 4-decimal PVF. Determine the equity component. (Round off your answer to the nearest peso.)
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
19.1 On January 1, 2025, ABC Company issued its 12%. 5-year convertible debt instrument with a face amount of P4,000,000 for P3,850,000. Interest is payable every June 30 and December 31 starting 2025. The debt instrument is convertible into 20,000 ordinary shares with a par value of P100. When the debt instruments were issued, the prevailing market rate of interest for similar debt without conversion option is 14%. ABC uses an effective interest method of amortization and 4-decimal PVF. Determine the equity component. (Round off your answer to the nearest peso.)
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