1. How important is it for MoGen to get $5 billion of external funding in 2006? Could the company cut back on its share repurchase program, for example, to reduce the funds needed? 2. What are the pros and cons of issuing convertible debt via straight debt or equity? 3. The case states a convertible bond can be valued as the sum of a straight bond plus a call option. Starting with the current stock price of $77.98 per share, how can you use the Black-Scholes model to estimate the value of the conversion option with a 25% conversion premium for one share of MoGen stock? Be prepared to explain your choice for the stock price, exercise price, risk-free rate, time to maturity, dividend yield, and volatility. How should you convert this option value per share into to the option value for a bond with $1,000 face value? 4. What is the value of the straight bond component? What coupon rate should Manaavi propose in order for the convert to sell at exactly $1,000 per bond? What discount rate did you use to value the straight bond component? Conceptually, what should happen to the coupon rate if Manaavi were to propose a 15% conversion premium? A 40% conversion premium? 5. As MoGens CEO, what do like and not like about this proposal from Merrill Lynch? In particular, do you like the 25% conversion premium? the coupon rate? 6. How can we use the Black-Scholes pricing model to value the conversion option component of the convertible? 7. What coupon rate did you get for a 25% conversion premium? (Optional: For a 15% premium? for a 40% premium?)