Convertible Bond Analysis Amount of funds needed Annual yield on straight nonconvertible debentures, rd $25,000,000 8.50% Stock price, Po Expected constant growth rate Expected dividend yield Expected return on equity, Is $22.00 6.50% 7.00% 13.50% Par value on convertible debentures Annual coupon rate on convertible debentures Length of maturity (in years) Conversion ratio (CR) Noncallable period (in years) Call price Decline in call price per year, starting Year 6 Call occurs when conversion exceeds % of par value Call occurs when conversion value exceeds $1,000 7.50% 20 34 5 $1,075 $5 20.00% $1,200 Determine the year bonds forced into conversion: Year bonds forced into conversion Formulas #N/A Determine the bond's value when conversion occurs: Conversion value of bond #N/A Determine cash flow to bondholder at time of conversion: Cash flow to bondholder #N/A Determine before-tax expected return on convertible issue: Before-tax expected rate of return, rconvertible #N/A Convertible Bond Analysis Amount of funds needed Annual yield on straight nonconvertible debentures, rd $25,000,000 8.50% Stock price, Po Expected constant growth rate Expected dividend yield Expected return on equity, Is $22.00 6.50% 7.00% 13.50% Par value on convertible debentures Annual coupon rate on convertible debentures Length of maturity (in years) Conversion ratio (CR) Noncallable period (in years) Call price Decline in call price per year, starting Year 6 Call occurs when conversion exceeds % of par value Call occurs when conversion value exceeds $1,000 7.50% 20 34 5 $1,075 $5 20.00% $1,200 Determine the year bonds forced into conversion: Year bonds forced into conversion Formulas #N/A Determine the bond's value when conversion occurs: Conversion value of bond #N/A Determine cash flow to bondholder at time of conversion: Cash flow to bondholder #N/A Determine before-tax expected return on convertible issue: Before-tax expected rate of return, rconvertible #N/A