On January 1, 2020, ABC Corporation issued P5,000,000, 12%, convertible bonds. The privilege allows the holder the right to convert the liability instrument into 25 ordinary shares with P25 par value for every P1000 convertible bond, with minimum cash out of P2 per share. The quoted market price of the bonds including the conversion feature cannot be determined reliably on this date but the effective interest rate of these instruments with the privilege is 10%. It requires payment of interest every January 1 starting 2021 until its maturity on January 1, 2028. The quoted price of the bonds ex – privilege cannot be determined reliably as well, however; the market interest rate of the bonds ex-privilege is 13% at the date of issue. Determine the amount to be allocated to the equity component out of the proceeds of the entire issue. (Use 4-decimal PVF and round off final answer to whole number)
2. On January 1, 2020, ABC Corporation issued P5,000,000, 12%, convertible bonds. The privilege allows the holder the right to convert the liability instrument into 25 ordinary shares with P25 par value for every P1000 convertible bond, with minimum cash out of P2 per share. The quoted market price of the bonds including the conversion feature cannot be determined reliably on this date but the effective interest rate of these instruments with the privilege is 10%. It requires payment of interest every January 1 starting 2021 until its maturity on January 1, 2028. The quoted price of the bonds ex – privilege cannot be determined reliably as well, however; the market interest rate of the bonds ex-privilege is 13% at the date of issue. Determine the amount to be allocated to the equity component out of the proceeds of the entire issue. (Use 4-decimal PVF and round off final answer to whole number)
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