Determine straight value and conversion value , Financial Accounting

Banana Computer has a perpetual, convertible 7% annual coupon bond outstanding. The bond has a face value of $1,000 and has a conversion price of $40. The required return on an otherwise identical nonconvertible bond is 8%. Banana will never pay dividends and its current stock price is $20.

a. What is the straight value of the convertible bond?

b. What is its conversion value?

c. If Banana's stock price were to grow at 10% per year forever, how long would it take for the bond's conversion value to exceed the bond price?

d. When should the bondholder convert? Why? 

 

 

Posted Date: 2/28/2013 12:05:54 AM | Location : United States







Related Discussions:- Determine straight value and conversion value , Assignment Help, Ask Question on Determine straight value and conversion value , Get Answer, Expert's Help, Determine straight value and conversion value Discussions

Write discussion on Determine straight value and conversion value
Your posts are moderated
Related Questions
Antitrust Laws - Assignment Help One of the foundations of business within the United States is the freedom to compete in the marketplace; however, certain laws have been creat

a. Create a worksheet in your excel file and name it "Part A Q2". In column A to E set up general journal and input the necessary journal entries to record the transactions and eve

The matching rule is applied a. because it is required by the Internal revenue Code b. by expensing certain items immediately and in their entirety c. to help make the bookkeeper's

Cumulative and substitutional legacies and devises Where a will makes two gifts of unequal amounts to the same person, they are assumed, in the absence of a contrary indication

Journal Entries for Dissolutions The following journal entries are relevant for the purpose of recording all dissolutions: 1)    DR.    Revaluation account CR.  Asset account

Lower of Cost or Market - Valuing ASSETS for financial reporting purposes. Normally‘cost' is the purchase price of the asset and ‘market' refers to its current replacement cost. GE

Q. Explain about Material event? Subsequent Event - Material event which takes place after the end of accounting period and before the publication of an entity's FINANCIAL STAT

What are main factors that Nor'easters should take into account in establishing a pricing policy? The minor revenue generators of Nor'easters include corporate sponsorships and


how can make a balance sheet