You have been hired to value a new 25-year callable, convertible bond. The bond has a coupon

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You have been hired to value a new 25-year callable, convertible bond. The bond has a coupon rate of 2.1 percent, payable annually. The conversion price is $54, and the stock currently sells for $26.45. The stock price is expected to grow at 11 percent per year. The bond is callable at $1,200, but, based on prior experience, it won’t be called unless the conversion value is $1,300. The required return on this bond is 8 percent. What value would you assign?

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Fundamentals Of Corporate Finance

ISBN: 9781265553609

13th Edition

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan

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