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BUZZ Corp. has a convertible bond issue outstanding. Each bond, with a face value of $1,000, can be converted into common shares at a rate
BUZZ Corp. has a convertible bond issue outstanding. Each bond, with a face value of $1,000, can be converted into common shares at a rate of 73.2512 shares of stock per
$1,000 face value bond (the conversion rate), or $13.651 per share. BUZZs common stock is trading (on the NYSE) at $14.90 per share and the bonds are trading at $972.
Calculate the conversion value of each bond.
- Determine if it is currently profitable for bond holders to
- convert their bonds into shares of BUZZ common stock.
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