The Surplus Value Company had $10 million (face value) of convertible bonds outstanding in 2001. Each bond
Question:
The Surplus Value Company had $10 million (face value) of convertible bonds outstanding in 2001. Each bond has the following features:
(a) What is the bond?s conversion value?
(b) Can you explain why the bond is selling above conversion value?
(c) Should Surplus call? What will happen if it does so?
Transcribed Image Text:
Par or face value Conversion price Current call price Current trading price Maturity Current stock price $1000 $25 105 (percent of face value) 130 (percent of face value) 2011 $30 (per share) 10 (coupon as percent of face value) Interest rate
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a With a 1000 face value for the bonds a bondholder can convert one bond into 100025 40 shares ...View the full answer
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Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
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