Jit No photos please (Chap 14) Similar to the example in class, assume that a firm has 450,000 shares of common stock outstanding and 15,000 convertible bonds, eachwith a face of $1,000. Each convertible bond can convert into 50 shares of common stock. Assume that the firm value at the maturity date of theconvertible bond is $25,000,000. Based on this firm value, will the convertible bondholders be better off converting into common stock or notconverting (and therefore receiving just the face amount of $1,000 per bond)? (As in class, assume the firm does not have any other debt other thanthe convertible bond and the amount owning to the convertible bondholders at the maturity date is the face amount of $1,000 per bond.)O The convertible bondholders will be better off converting into common stock.O The convertible bondholders will be better off not converting into common stock and just receiving the $1,000 face.

Value of company is sum of value of debt and sum of value of equity depending on the number of bonds…

Chap 14) Similar to the example in class, assume that a firm has 450,000 shares of common stock outstanding and 15,000 convertible t with a face of $1,000. Each convertible bond can convert into 50 shares of common stock. Assume that the firm value at the maturity dat convertible bond is $25,000,000. Based on this firm value, will the convertible bondholders be better off converting into common stock or converting (and therefore receiving just the face amount of $1,000 per bond)? (As in class, assume the firm does not have any other deb the convertible bond and the amount owning to the convertible bondholders at the maturity date is the face amount of $1,000 per bond.) O The convertible bondholders will be better off converting into common stock. O The convertible bondholders will be better off not converting into common stock and just receiving the $1,000 face.