13th Edition

ISBN: 9781260013900

Author: BREALEY

Publisher: RENT MCG

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Textbook Question

Chapter 24, Problem 17PS

Convertible bonds* Maple Aircraft has issued a 4¾% convertible subordinated debenture due 2023. The conversion price is $47.00 and the debenture is callable at 102.75% of face value. The market price of the convertible is 91% of face value, and the price of the common is $41.50. Assume that the value of the bond in the absence of a conversion feature is about 65% of face value.

a. What is the conversion ratio of the debenture?
b. If the conversion ratio were 50, what would be the conversion price?
c. What is the conversion value?
d. At what stock price is the conversion value equal to the bond value?
e. Can the market price be less than the conversion value?
f. How much is the convertible holder paying for the option to buy one share of common stock?
g. By how much does the common have to rise by 2023 to justify conversion?

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Chapter 24, Problem 16PS

Chapter 24, Problem 18PS

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Chapter 24 Solutions

PRIN.OF CORPORATE FINANCE

Ch. 24 - Bond terms Use Table 24.1 (but not the text) to...Ch. 24 - Bond terms Look at Table 24.1: a. The AMAT bond...Ch. 24 - Bond terms Select the most appropriate term from...Ch. 24 - Prob. 5PS Ch. 24 - Bond terms Bond prices can fall either because of...Ch. 24 - Security and seniority a. As a senior bondholder,...Ch. 24 - Prob. 8PS Ch. 24 - Prob. 9PS Ch. 24 - Security and seniority a. Residential mortgages...Ch. 24 - Sinking funds For each of the following sinking...

Ch. 24 - Call provisions a. Look at Table 24.1. Suppose...Ch. 24 - Covenants Alpha Corp. is prohibited from issuing...Ch. 24 - Prob. 14PS Ch. 24 - Private placements Explain the three principal...Ch. 24 - Convertible bonds True or false? a. Convertible...Ch. 24 - Convertible bonds Maple Aircraft has issued a 4%...Ch. 24 - Convertible bonds The Surplus Value Company had 10...Ch. 24 - Prob. 19PS Ch. 24 - Convertible bonds Iota Microsystems 10%...Ch. 24 - Convertible bonds Zenco Inc. is financed by 3...Ch. 24 - Prob. 22PS Ch. 24 - Prob. 23PS Ch. 24 - Bank loans, commercial paper, and medium-term...Ch. 24 - Prob. 25PS Ch. 24 - Tax benefits Dorlcote Milling has outstanding a 1...Ch. 24 - Convertible bonds This question illustrates that...Ch. 24 - Prob. 28PS

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