What determines the value of a call provision

Assignment Help Financial Management

Reference no: EM13731553

The core business of TVL Corporation is undergoing a difficult period. TVL bonds have been downgraded to CCC in order to reflect the higher probability of default the company now faces. TVL is considering a very promising (high NPV, low risk) capital investment project which, if successful, will get it out of its current predicament. Financing the project will require issuing more high-yield debt at a very substantial yield. TVL plans to attach a call provision to its bonds.

a) What is the role of the call provision in the specific case of TVL?

b) What determines the value of a call provision? How will the call provision affect the pricing of the issue?

c) Do you expect the call provision to be costly to TVL? Explain.

Reference no: EM13731553

Questions Cloud

Analyze work performance : The CEO does not agree, and has tasked Francie with developing a plan that will analyze work performance and determine what needs to be done to effectively increase performance, instead of hiring new employees. She needs to provide a strategic rec..

What are the strategies and goals of your company : What are the strategies/goals of your company and how does your selected process support/fit them, Who are the stakeholders in the process, what are their expectations, and what are the goals of the process

The yield to maturity of the bond : A bond sells for $941.15 and has a coupon rate of 7.80 percent. If the bond has 21 years until maturity, what is the yield to maturity of the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. O..

Major mission and vision of the company : Then most importantly identify the major mission and vision of the company, the goals and objectives, and state whether it is in line with the needs of the major stakeholders involved (e.g., the customers, the employees, and such).

What determines the value of a call provision : The core business of TVL Corporation is undergoing a difficult period. TVL bonds have been downgraded to CCC in order to reflect the higher probability of default the company now faces. TVL is considering a very promising (high NPV, low risk) capital..

Detail value that build-a-bear creates for its customers : Give examples of needs, wants, and demands that Build-A Bear customers demonstrate, differentiating each of these three concepts. What are the implications of each on Build A-Bear's actions?

How to constructing a business plan for the restaurant : For your term project, you are going to explore your restaurant. The exploration will be constructing a business plan for the restaurant you have been using throughout the term of the class.

What is the value of the warrants : CWI is considering whether to raise $1 billion by issuing a unit consisting of $1 billion- 7.5%-10 year subordinated debentures ($1,000 face value each) and 14.71 detachable warrants, each entitling the holder to purchase a share of CWI for $68 payab..

What is pharmecologys current stock price : Pharmecology is about to pay a dividend of $1.65 per share. It’s a mature company, but future EPS and dividends are expected to grow with inflation, which is forecasted at 4.25% per year. The nominal cost of capital is 11.00%. What is Pharmecology’s ..

User Account

All Pages