The Surplus Value Company had $10 million (face value) of convertible bonds outstanding in 2015. Each bond
Question:
The Surplus Value Company had $10 million (face value) of convertible bonds outstanding in 2015. Each bond has the following features.
a. What is the bond?s conversion value?
b. Can you explain why the bond is selling above conversion value?
c. Should Surplus call? What will happen if it does so?
Transcribed Image Text:
$1,000 Face value $25 Conversion price Current call price 105 (percent of face value) 130 (percent of face value) Current trading price 2022 Maturity $30 (per share) Current stock price 10% (coupon as percent of face value) Interest rate
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a Conversion number of shares 1000 25 40 Conversion value 40 X 30 1200 b A conver...View the full answer
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Related Book For
Principles of Corporate Finance
ISBN: 978-1260013900
13th edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen
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