(a) Closer plc needs to raise some finance and is currently deciding whether to issue either convertible debentures or debentures with warrants attached. The following information has been provided. Current ex-div share price of Closer plc: Expected annual share-price growth (next 5 years): £5.23 Debentures with warrants: Number of years to maturity: Coupon: Redemption value: Investor's estimated required rate of return: Number of warrants per bond: Number of shares per warrant Number of years until warrant exercise date: Strike price of warrant: 6 years 8% £100 7% One 30 4 years £6.25

(a) Closer plc needs to raise some finance and is currently deciding whether to issue either convertible debentures or debentures with warrants attached. The following information has been provided. Current ex-div share price of Closer plc: Expected annual share-price growth (next 5 years): £5.23 Debentures with warrants: Number of years to maturity: Coupon: Redemption value: Investor's estimated required rate of return: Number of warrants per bond: Number of shares per warrant Number of years until warrant exercise date: Strike price of warrant: 6 years 8% £100 7% One 30 4 years £6.25

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Please I need the below attached question related to finance ( Bonds) ASAP.
Thank you

Closer plc needs to raise some finance and is currently deciding whether to
issue either convertible debentures or debentures with warrants attached.
(a)
The following information has been provided.
£5.23
Current ex-div share price of Closer plc:
Expected annual share-price growth (next 5 years): 6%
Debentures with warrants:
Number of years to maturity:
Coupon:
Redemption value:
Investor's estimated required rate of return:
Number of warrants per bond:
Number of shares per warrant
Number of years until warrant exercise date:
Strike price of warrant:
6 years
8%
£100
7%
One
30
4 years
£6.25

4 years
Number of years until warrant exercise date:
Strike price of warrant:
£6.25
Convertible debentures:
Number of years to maturity:
Coupon:
Redemption value:
investor's estimated required rate of return:
7 years
6%
£100
8%
18
5 years
Number of shares on conversion:
Number of years until conversion date:
Required:
Based on the information above, calculate the price investors will be prepared
to pay for:
(1)
the debentures with warrants and
(2)
the convertible debentures
when they are issued on the capitai markets by Closer pic.

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