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Question 1: The Contrell Company is planning to finance an expansion with convertible preferred stock. Each share will pay a dividend of $2.10 per share. The price of the company's common stock is currently $42. The conversion ratio will be 1.0, i.e., each share of convertible preferred can be converted into one share of common. The convertible's par value (and also the issue price) will be equal to the conversion price. The conversion price will be a premium over the current market price of the common stock.
a. Calculate the conversion price if it is set at a 10% premium.
b. Calculate the conversion price if it is set at a 30% premium
c. If the company expects its growth rate to be high, would it be better to use a premium of 10% or a 30%? Why?
d. If the company expects its growth rate to be low, would it be better to use a premium of 10% or a 30%? Why?
e. Should the convertible preferred stock include a call provision? Why or why not?
General Mills has a $1,000 par value, 26-year to maturity bond outstanding with an annual coupon rate of 10.00 percent per year, paid semiannually. Market interest rates on similar bonds are 9.14 percent. Calculate the bond's price today.
The portfolio has a return of 17.3 percent. The return for Stock A is 8.9 percent, for Stock B is 34.6 percent, and for Stock C is 17.7 percent. What is the return for Stock D?
delmont movers has a profit margin of 6.2 percent and net income of 48900. what is the common size percentage for the
The sales person assures you that the car is in great shape and has had no major problems. What type of asymmetric information problem is present here? How can you get around the problem?
a project for jevon and aaron inc. results in additional accounts receivable of 200000 additional inventory of 120000
how does the net present value model complement the objective of maximizing shareholder
A discount bond has a face value of $10000 and promises repayment at the end of 15 years and has a market price of $3541. What is its effective yield?
Cheryl Colby, the CFO of Charming Florist Ltd., has created the company's pro forma balance sheet for the next fiscal year. Sales are projected to grow at 10% to the level of $330 million.
If the firm could purchase a press that would provide slightly better quality and $26,000 annual cash inflow for 10 years for a price of $120,000 which alternative would you recommend? Why?
Family A and B both consist of a father, mother, and two children of school age. In family A both spouses have jobs outside the home and receive a combined income of $100,000 per year.
A. If the venture’s equity value is $2.45 million, what would be the associated enterprise value? B. Assume the venture’s enterprise value has been estimated to be $5.3 million (ignore any information from Part A). What would be the venture’s equity ..
To test this, a consumer group found the cost of maintaining 10 cars for a year, and the mean saving was €79 with a standard deviation of €20. What does this say about the manufacturer's claim?
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