Dickson Industries has bonds outstanding that have $100 par value and are convertible into

the company's common stock at $34 per stock. The convertibles have annual coupon rate of

7% and mature in 25 years. Straight debt of equivalent risk is yielding 9%. The company's

common stock is selling at $41 per share.

NOTE: note that the par value of each bond is $100. Keep that in mind when considering the

bond's coupons!

a)

Determine the conversion value of the issue

b)

Determine the straight-bond value of the issue

c)

Do you think that investors should convert their bonds into stock? why?

d)

Determine the minimum stock price at which the investors are better off not

converting their bonds