Calculate pv of cash flows, Financial Accounting

Assignment Help:

Q. Calculate PV of cash flows?

808_Calculate PV of cash flows.png

Estimated market value                                              $116·26 per $100 of debentures

The value of 45 shares in 5 years' time is expected to be $4 × 45 = $180. The value of debenture redemption will be $110. Therefore it is likely that conversion will take place.

(ii)

Questionably the most important reservation concerns the future value of the share since it is likely to be the most uncertain aspect of the calculation. Other things that may be relevant but which are less uncertain, are issue price, and the cost of capital used.

 (c)

By maximising the conversion premium the greatest amount of funds are raise for the fewest number of new shares issued.

Companies are able to issue convertibles with a high conversion premium because firstly the calculation in part (a)i produces a positive NPV against issue costs and, secondly because there is high growth potential in share value.


Related Discussions:- Calculate pv of cash flows

Calculate the amount of profit or loss, On 1 January 2009, a company, Yeti,...

On 1 January 2009, a company, Yeti, granted an employee the right to choose between (i) 30,000 Yeti shares or (ii) a cash-payment equivalent to the price of 24,000 Yeti shares on 3

What do you understand by accumulated funds, QUESTION 1: Part A Ma...

QUESTION 1: Part A Malcolm was in business as an import merchant and the following balances were extracted from his books on 31st December 2003: Purchases

The statement of changes in equity-financial statement , THE STATEMENT OF C...

THE STATEMENT OF CHANGES IN EQUITY This is a very important report because it explains the movements in the shareholder funds during the year and also acts as a link between the

Calculate the earnings per share, Q. Calculate the earnings per share? ...

Q. Calculate the earnings per share? Dividend cover is a measure of the relationship among dividends and earnings and may be calculated for the whole company or on a per share

Is the emergency center a wise use of the hospital''s , Consider a not-for-...

Consider a not-for-profit hospital faced with a familiar choice: to open or not to open an emergency center in a new suburban hospital shopping mall.  The mall's developers claim t

How large would the annual cash inflow, The management of Gimenez Corporati...

The management of Gimenez Corporation is investigating an investment in equipment that would have a useful life of 7 years. The company uses a discount rate of 17% in its capital b

Prepare the income statement and balance sheet, Below is the Trial Balance ...

Below is the Trial Balance for Clay Employment Services, year ending December 31, 2011.  Previous period's information were as follows: net receivables, $290,000 and inventory, $82

Compute the companys largest available depletion deduction, In May 2011, Yo...

In May 2011, Your Company purchased the rights to a natural resource for $4,125,000. The estimated recoverable units from the natural resource amount to 5,500,000 units. During the

Excel., prepare an balance sheet

prepare an balance sheet

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd