Assume that you purchased a $1,000 convertiblecorporate bond. Also, assume the bond can beconverted to 35.714 shares of the firm's stock. Whatis the dollar value that the stock must reach beforeinvestors would consider converting to commonstock?

To determine the stock price at which investors would consider converting the bond into common…

Answered: Assume that you purchased a $1,000…

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter8: Securities Law Considerations When Obtaining Venture Financing

Section: Chapter Questions

Problem 1fM

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A$1,000 face value convertible bond has a conversion ratio of 31 and is about to mature. Ignoring any transaction costs, what price must the stock surpass in order for you to convert? The required price per share will be $ (Round to the nearest cent.)
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Swift Bicycles plans to issue convertible bonds to finance its future growth. Each convertible bond has a face value equal to $1,000 and can be converted into 25 shares of common stock. What is the minimum stock price that would make it beneficial for bondholders to convert their bonds?
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Assume that Almond Milk Company has a $1,000 face value bond with a stated coupon rate of 8.18 percent that is convertible into its common stock at $35.77. The bond is selling at $1,096.27 in the market. The common stock is selling for $33.84 and pays a dividend of 0.62 per share. Calculate the payback premium period.
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Consider this example: Shares of Ex Why Zee, Inc. (ticker symbol: XYZ) are currently trading at $6 per share. XYZ plans to issue $6M in short term debt and use the money they borrow to repurchase $6M worth of their own stock. What effect will the debt issuance and share repurchase have on the balance sheet? There isn't enough information to answer this question Assets will increase by $6M Liabilities will decrease by $6M Number of Shares Outstanding will increase by 1 million Equity will decrease by $6M
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Assume that you purchased a $1,000 convertible corporate bond. Also, assume the bond can be converted to 35.714 shares of the firm's stock. What is the dollar value that the stock must reach before investors would consider converting to common stock?