2"1The Swift Company is planning to finance an expansion. The principal executivesof the company agree that an industrial company such as theirs should finance growth by issuing common stock rather than by taking on additional debt.Because they believe that the current price of Swift's common stock does notreflect its true worth, however, they have decided to sell convertible bonds. Eachconvertible bond has a face value equal to $1,000 and can be converted into 25 shares of common stock.a.What would be the minimum price of the stock that would make it beneficial for bond holders to convert their bonds? Ignore the effects of taxes or other costs.b.What would be the benefits of including a call provision with these bonds?Convertible Preferred Stock

2-2Four years ago, Ideal Solutions issued convertible preferred stock with a par valueof $50 and a stated dividend of 8 percent. Each share of preferred stock can beconverted to four shares of common stock at the option of the investor. Whenissued, the preferred stock was sold at par value such that Ideal raised $2.5 millionto fund expansion of its operations.a.What is the annual dividend per share on the preferred stock?b.What is the conversion price of the preferred stock? When should an investorconsider convertinginto common stock? (Ignore taxes and other costs thatmight be associated with conversion.)c.If all investors convert their preferred stock to common stock, how manynew shares of common stock"

2"3Filkins Farm Equipment needs to raise $4.5 million for expansion, and it expects thatfive-year zero coupon bonds can be sold at a price of $567.44 for each $1,000 bond.a.How many $1,000 par value, zero coupon bonds would Filkins have to sellto raise the needed $4.5 million?b.What will be the burden of this bond issue on the future cash flows generatedby Filkins? What will be the annual debt service costs"