1. XYZ company has 20 outstanding shares of stocks and 10 bonds. All the bonds are...

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1. XYZ company has 20 outstanding shares of stocks and 10 bonds. All the bonds are held by Mr. Black. XYZ company promises to pay each bond $10 in the end of year. Black's value? What are the existing Black's value? What are the existing (a) If the firm's value is $80, what is Mr. shareholders' values? (b) If the firm's value is $120, what is Mr. shareholders' values? Suppose that XYZ company has also 10 convertible bonds, which are also owned by Mr. Black. He can choose to convert the bonds into equities in the end of this year. Each convertible bond can be exchanged to 8 shares of stocks. Otherwise, the convertible bonds will be the same as the common bonds. (c) What is Mr. Black's value if the firm's value is $300? (d) What is Mr. Black's value if the firm's value is $2000? (e) If we restrict Mr. Black's behavior, so that he can choose either convert all his convertible bonds into equities or keep all his convertible bonds as common bonds. What is the firm's value such that Mr. Black is indifferent between converting and not converting the convertible bonds? 1. XYZ company has 20 outstanding shares of stocks and 10 bonds. All the bonds are held by Mr. Black. XYZ company promises to pay each bond $10 in the end of year. Black's value? What are the existing Black's value? What are the existing (a) If the firm's value is $80, what is Mr. shareholders' values? (b) If the firm's value is $120, what is Mr. shareholders' values? Suppose that XYZ company has also 10 convertible bonds, which are also owned by Mr. Black. He can choose to convert the bonds into equities in the end of this year. Each convertible bond can be exchanged to 8 shares of stocks. Otherwise, the convertible bonds will be the same as the common bonds. (c) What is Mr. Black's value if the firm's value is $300? (d) What is Mr. Black's value if the firm's value is $2000? (e) If we restrict Mr. Black's behavior, so that he can choose either convert all his convertible bonds into equities or keep all his convertible bonds as common bonds. What is the firm's value such that Mr. Black is indifferent between converting and not converting the convertible bonds?

Answer rating: 100% (QA)

Analyzing Mr Blacks and Shareholders Values in XYZ Company a Firm Value 80 Mr Blacks Value Bond value 10 bonds 10bond 100 Since all bonds are held by ... View the full answer