A company has issued 25 million of 5% convertible bonds, redeemable in four-years time or convertible into
Question:
A company has issued €25 million of 5% convertible bonds, redeemable in four-years’
time or convertible into 50 shares. The current price of the bonds is €88 ex interest and the current market price of the company’s shares is €1.65 ex div. If the share price is expected to rise by 8% per year in future, calculate the after-tax cost of the convertibles.
The corporation tax rate is 20%.
AppendixLO1
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answered By
Anurag Agrawal
I am a highly enthusiastic person who likes to explain concepts in simplified language. Be it in my job role as a manager of 4 people or when I used to take classes for specially able kids at our university. I did this continuously for 3 years and my god, that was so fulfilling. Sometimes I've skipped my own classes just to teach these kids and help them get their fair share of opportunities, which they would have missed out on. This was the key driver for me during that time. But since I've joined my job I wasn't able to make time for my passion of teaching due to hectic schedules. But now I've made a commitment to teach for at least an hour a day.
I am highly proficient in school level math and science and reasonably good for college level. In addition to this I am especially interested in courses related to finance and economics. In quest to learn I recently gave the CFA level 1 in Dec 19, hopefully I'll clear it. Finger's crossed :)
2+ Reviews
10+ Question Solved
Related Book For 
Corporate Finance Theory And Practice
ISBN: 9781473758384
10th Edition
Authors: Steve Lumby, Chris Jones
Question Posted:
