Nullcom, Inc , has debentures (face value $1,000) outstanding that are convertible into common stock at a price of $40 per share The debentures pay an interest rate of 9 percent per annum and have a remaining life of 10 years Nonconvertible debentures of a similar credit rating and maturity are sel...

Conversion ratio 1000 40 25 shares a Bond value 90 PVIFA 1110 1000 PVIF 11 ...

Nullcom, Inc., has debentures (face value = $1,000) outstanding that are convertible into common stock at a

Question:

Nullcom, Inc., has (face value = $1,000) outstanding that are convertible into at a price of $40 per share. The pay an interest rate of 9 percent per annum and have a remaining life of 10 years. Nonconvertible of a similar credit rating and are selling at a price to yield 11 percent. The current price of a share of Nullcom’s stock is $35.
a. Compute the straight bond value of each of these .
b. Compute the conversion value of each of these .
c. What is the absolute minimum price for one of these today? What price would you expect to pay for one of these ?
d. If the are called at 105 today and you own 10 of these , what action should you take?

Debentures
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who... Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...