MyLab Finance with Pearson eText -- Access Card -- for Principles of Managerial Finance
15th Edition
ISBN: 9780134479903
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Textbook Question
Chapter 17, Problem 17.14P
Determining values: Convertible bond Craig’s Cake Company has an outstanding issue of 15-year convertible bonds with a $1,000 par value. These bonds are convertible into 80 shares of common stock. They have an 8% annual coupon rate, whereas the interest rate on straight bonds of similar risk is 10%.
- a. Calculate the straight
bond value of this bond. - b. Calculate the conversion (or stock) value of the bond when the market price is $9, $12, $13, $15, and $20 per share of common stock.
- c. For each of the common stock prices given in part b, at what price would you expect the bond to sell? Why?
- d. Make a graph of the straight value and conversion value of the bond for each common stock price given. Plot the per-share common stock prices on the x-axis and the bond values on the y-axis. Use this graph to indicate the minimum market value of the bond associated with each common stock price.
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a. Calculate the straight bond value of the bond.
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b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases
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Please do not provide answer in image formate thank you.
DAB Company has an outstanding issue of convertible bonds with a $10,000 par value. These bonds are convertible into 20 shares of common stock. They have a 10 per cent coupon and a 20-year maturity. The interest rate on a straight bond of similar risk is five per cent. a. Calculate the straight bond value of the bond. b. Calculate the conversion value of the bond when the market price of the stock is $30/share. c. What is the least you would expect the bond to sell for at a market price of common stock of $18/share?
Chapter 17 Solutions
MyLab Finance with Pearson eText -- Access Card -- for Principles of Managerial Finance
Ch. 17.1 - Prob. 17.1RQCh. 17.2 - What is leasing? Define, compare, and contrast...Ch. 17.2 - Describe the four basic steps involved in the...Ch. 17.2 - What type of lease must be treated as a...Ch. 17.2 - Prob. 17.5RQCh. 17.3 - What is the conversion feature? What is a...Ch. 17.3 - When the market price of the stock rises above the...Ch. 17.3 - Define the straight bond value, conversion (or...Ch. 17.4 - What are stock purchase warrants? What are the...Ch. 17.4 - Prob. 17.10RQ
Ch. 17.4 - Prob. 17.11RQCh. 17.5 - Prob. 17.12RQCh. 17.5 - How can the firm use currency options to hedge...Ch. 17 - N and M Corp, is considering leasing a new machine...Ch. 17 - During the past 2 years Meacham Industries issued...Ch. 17 - Newcomb Company has a bond outstanding with a...Ch. 17 - Crystal Cafes recently sold a 1,000-par-value, 1...Ch. 17 - A 6-month call option on 100 shares of SRS Corp...Ch. 17 - Prob. 17.1PCh. 17 - Prob. 17.2PCh. 17 - Loan payments and interest Schuyler Company wishes...Ch. 17 - Prob. 17.4PCh. 17 - Prob. 17.5PCh. 17 - Lease-versus-purchase decision Joanna Browne is...Ch. 17 - Capitalized lease values Given the lease payments,...Ch. 17 - Conversion price Calculate the conversion price...Ch. 17 - Conversion ratio What is the conversion ratio for...Ch. 17 - Conversion (or stock) value What is the conversion...Ch. 17 - Conversion (or stock) value Find the conversion...Ch. 17 - Straight bond value Calculate the straight bond...Ch. 17 - Determining values: Convertible bond Eastern Clock...Ch. 17 - Determining values: Convertible bond Craigs Cake...Ch. 17 - Prob. 17.18PCh. 17 - Prob. 17.23P
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