Corporate finance question in the attached image$($#$4)$

4) Molycorp Inc (MCP), the Western Hemisphere's only producer of rare earth oxides, announced last month that they had sold 500,000 shares of convertible preferred equity (CPE). Each share of CPE will pay an annual dividend rate of 5.5% on the $1,000 liquidation value. This dividend rate is high, given MCP's stock currently pays zero dividends (and is expected to pay zero dividend over the next 2 years). Dividends will be paid quarterly with the last dividend payment made on February l, 2020. The proceeds of the CPE issue will fund MCP's Phase Two expansion which will allow them to produce rare earth oxide (REO) at a rate of 40,000 metric tons per year at their Mountain Pass, California facility. On March l, 2020, each CPE will convert into shares of common stock. The owner of the CPE does not have the option to convert, conversion always happens. However, the number of shares of common stock that each CPE converts into is uncertain and will be calculated as: A) B) C) D) 1, 000 Number of shares common per CPE Min 10, MCP,3/1/2014 Draw the payoff diagram for one share of convertible preferred equity as a function of the asset value of MCP on March l, 2020. Assume MCP has no debt and there are currently 20M shares of common stock outstanding. Make sure your diagram is completely and clearly labeled. 3000 2500 2000 1500 1000 500 o 1000 2000 3000 4000 5000 6000 7000 8000 The convertible preferred equity gives investors the opportunity to invest in MCP common stock but with a higher dividend. Should the CPE sell for more or less than 10 times the current stock price based on public information? Suppliers are not technically creditors of the firm. However, suppliers who invest in developing specialized mining equipment for Molycorp Inc. care if the firm survives. Would suppliers be more confident in Molycorp's ability to survive and continue to fund their business if Molycorp had issued common equity or the convertible preferred equity with an aggregate liquidation value of $500M [500,000 CPE * 1,000 liquidation value per CPE]? You have been studying the market for rare earth oxides (REO) and the growing demand from the Chinese manufacturing sector. You think the market is underestimating the volatility of the price of REO, but unfortunately there are no traded options on REOs. Would the purchase of MCP common equity or MCP preferred equity be a better way to monetize your view (assummg you are correct)?