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What is the bond conversion value in year five

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Problem 1: Cannon Manufacturing is considering issuing 18-year, 7.8% annual coupon, $1,000 face value convertible bonds at a price of $1,000 each. Each bond would be convertible into 22 shares of common stock. If the bonds were not convertible, investors would require an annual yield of 11.8%. The stock's current price is $22.00, its expected dividend is $2.60, and its expected growth rate is 5.9%. The bonds are noncallable for 10 years. What is the bond's conversion value in Year 5?

Reference no: EM132879268

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