Question: Nullcom, Inc., has debentures (face value = $1,000) outstanding that are convertible into common stock at a price of $40 per share. The debentures pay

Nullcom, Inc., has (face value = $1,000) outstanding that are convertible into at a price of $40 per share. The pay an interest rate of 9 percent per annum and have a remaining life of 10 years. Nonconvertible of a similar credit rating and are selling at a price to yield 11 percent. The current price of a share of Nullcom’s stock is $35.
a. Compute the straight bond value of each of these .
b. Compute the conversion value of each of these .
c. What is the absolute minimum price for one of these today? What price would you expect to pay for one of these ?
d. If the are called at 105 today and you own 10 of these , what action should you take?

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