Question
Hello please include the formulas and explanations so i can see the steps involved in solving the questions. 1.Suppose Disney issued a convertible (non-callable) bond
Hello please include the formulas and explanations so i can see the steps involved in solving the questions.
1.Suppose Disney issued a convertible (non-callable) bond with an annual coupon of 10% that matures in 5 years.The conversion ratio is 26.32 shares of stock per bond and Disney's stock is currently trading at $30 per share. The convertible bond is priced at $900 in the market and the appropriate discount rate is 13%.
a.What is the Straight Bond Value of this convertible?
b.What is the Option Value of the Bond?
c.What is the Conversion Value of the Bond?
d.Based solely on today's values, should you convert?
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