BRW Co has 10% redeemable loan notes in issue trading at $90. The loan notes are redeemable at a 10%premium in five years' time, or convertible at that point into 20 ordinary shares. The current share price is$2.50 and is expected to grow at 10% per annum for the foreseeable future. BRW Co pays 30% corporation tax. 

What is the best estimate of the cost of these loan notes?

Answer rating: 100% (QA)

To calculate the cost of the loan notes we need to consider the value of the two options that the holder has in five years time Option 1 Redemption If ... View the full answer