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17. Charles River Company has just sold a bond issue with 10 warrants attached. The bonds have a 20-year maturity, an annual coupon rate of 12.0 pereent, and they sold at their $1,000 par value. The current yield on similar straight bonds is 15.5 pervent. What is the implied value of each warrant? a. $18.78 b. $19.24 c. $20.21 d. $21.32 e. $22.56 18. Florida Enterprises is considering issuing a 10-year convertible bond that will be priced at its $1,000 par value. The bonds have an 8.0 percent annual coupon rate, and each bond can be converted into 20 shares of common stock. The stock currently sells at $40 a share, has an expected dividend in the coming year of $5, and has an expected constant growth rate of 4.0 percent. Defining the "floor price" as the larger of the (straight) bond value and the conversion value, what is the estimated floor price of the convertible at the end of Year 3 if the required rate of return on a similar straight-debt issue is 10.0 percent? a. $902.63 b.$926.10c.$961.25 d. $988.47 e. $1,000.00 Problems (Show your work for partial credit) 1. Reading Railroad's common stock is currently priced at $32, and its 8 percent convertible debentures (issued at par, or $1,000 ) are priced at $850. Each debenture can be converted into 25 shares of common stock at any time before 2041 (i.e., the maturity of the debentures is 20 years). a. What is the conversion price, PC, and the conversion value, CV0, of the bond? b. Suppose Reading plans to call the bonds once the conversion value hits $1,200. If the stock follows the constant growth model with a growth rate of 3% when will they be called