Judging on the basis of the conversion ratio

Reference no: EM131112182

Valerian Corp. convertible preferred stock has a fixed conversion ratio of 5 common shares per 1 share of preferred stock. The preferred stock pays a dividend of $10.00 per share per year. The common stock currently sells for $20.00 per share and pays a dividend of $1.00 per share per year.

a. Judging on the basis of the conversion ratio and the price of the common shares, what is the current conversion value of each preferred share?

b. If the preferred shares are selling at $96.00 each, should an investor convert the preferred shares to common shares?

c. What factors might cause an investor not to convert from preferred to common stock?

Reference no: EM131112182

Questions Cloud

What is the maximum price per share : What is the maximum price per share that Newman should pay for Grips if it has a required return of 15% on investments with risk characteristics similar to those of Grips?

What required rate of return would result in a price : What required rate of return for this stock would result in a price per share of $28? If McCracken expects both earnings and dividends to grow at an annual rate of 10%, what required rate of return would result in a price per share of $28?

What is the market value of the outstanding preferred stock : What is the market value of the outstanding preferred stock? If an investor purchases the preferred stock at the value calculated in part a, how much does she gain or lose per share if she sells the stock when the required return on similar-risk pref..

What impact does risk have on value : If the required return is 12%, what will be the value of Scotto’s common stock? If the firm’s risk as perceived by market participants suddenly increases, causing the required return to rise to 20%, what will be the common stock value? Judging on the..

Judging on the basis of the conversion ratio : Judging on the basis of the conversion ratio and the price of the common shares, what is the current conversion value of each preferred share? If the preferred shares are selling at $96.00 each, should an investor convert the preferred shares to comm..

How many dollars of preferred dividends per share : In each case in the following table, how many dollars of preferred dividends per share must be paid to preferred stockholders in the current period before common stock dividends arepaid?

What is the annual dollar dividend : Slater Lamp Manufacturing has an outstanding issue of preferred stock with an $80 par value and an 11% annual dividend. What is the annual dollar dividend? If it is paid quarterly, how much will be paid each quarter?

What is the maximum number of new shares of common stock : Discussions with its investment bankers indicate that the sale of new common stock will net the firm $60 per share. What is the maximum number of new shares of common stock that the firm can sell without receiving further authorization from sharehold..

User Account

All Pages