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Your company needs $100 Million for expansion and decides to issue a 5-year convertible bond. The stock price currently is $41.67 and your banker recommends a 20% conversion premium. The total option value of the convertible will be $92.22 per $1,000 face amount of bond. The company's current cost of 5-year debt is 3% assuming semi-annual interest payments.
What should be the annual coupon of the convertible bond assuming you want the bond to trade at par? The coupon will be paid semi-annually.
How many shares will each $1,000 bond convert?
What is the return for an investor if the stock price in 5 years is 60?
You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1’s elasticity of demand is -2, while group 2’s is -3. Your marginal cost of producing the product is $30. Determine your optim..
Three former college classmates have decided to pool a variety of work experiences by opening a store near campus to sell wireless equipment to students. The business has been incorporated as University Wireless. Several transactions occurred in Marc..
Agency Costs. What are agency costs? List some ways by which agency costs are mitigated.
The Reynolds Corporation buys from its suppliers on terms of 2/19, net 50. What is the effective rate of interest on the bank loan?
ABC Corp. has been forced to file for bankruptcy. Calculate the value of a new $1,000 par value bond assuming a yield to maturity of 10%.
Use the one period binomial option pricing model to value a European call option with strike price of $140 and time to maturity of six months.
Ben & Jerry’s (BNJ) mission statement has three dimensions. Using the facts of the case, how well has the company fulfilled each of them?
What is the stock price assuming no investment opportunities? What is the stock price when Hyper has these two opportunities?
You plan to buy a house for $500,000 using a 30-year mortgage obtained from your local bank. Mortgage rate of 6% and zero point
Describe how the financial statements (the income statement, statement of retained earnings, balance sheet and statement of cash flows) are interrelated.
A successful joint venture is expected to result in the 4.0% growth rate until 2000 but would increase the company’s normal growth rate to a constant 8.00% after that time. The joint venture also is expected to increase investors’ required return to ..
Should the major decisions on resource depletion (especially energy policy) be made: By government experts? By scientific experts? By everyone? Provide and develop moral arguments in support of your judgment.
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