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Currently the common stock is selling for $ 1 3 ; the yield on nonconvertible bonds is 1 0 % , and the yield on

Currently the common stock is selling for $

13

; the yield on nonconvertible bonds is

10 %,

and the yield on comparable preferred stocks is

14 % .

What is the value of the above securities in terms of the common stock? What would be the value of each security if it lacked the conversion feature?

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