Baileys Pet Supply, Inc. has straight nonconvertible bond that currently yield 8.75%. Bailey's stock sells for $25 per share, has an expected constant growth rate of 5.9%, and has a dividend yield of 5%. Bailey plans on issuing convertible bonds that will have a $1,000 par value, a coupon rate of 7.85%, a 20-year maturity, and a conversion ratio of 35. Coupon payments will be made annually. The bonds will be noncallable for 5 years, after which they will be callable at a price of $1,080; this call price would decline by $5 per year in Year 6 and each year thereafter. For simplicity, assume that the bonds may be called or converted only at the end of a year