Consider a convertible bond with a face value of $1,000 and a conversion ratio of 25.If the

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Question:

Consider a convertible bond with a face value of $1,000 and a conversion ratio of 25.If the bond is convertible into common stock of the issuer, and the common stock is trading for $36 per share, the conversion value of this bond is closest to:

A.$900

B.$1,000

C.$25,000

D.$36,000

1.Consider the following data from the balance sheet of DEF company:

Accounts payable

$200

Short-term debt

$450

Accrued compensation

$300

Income taxes

$100

Short-term unearned revenue

$500

Long-term debt

$800

The debt capital of DEF is closest to:

A.$1,250

B.$1,350

C.$1,600

D.$2,600

2.Suppose an investment requires the purchase of equipment for $10,000 and decreases working capital by $500. The company must spend $1,000 to install the equipment.The investment cash flow for this project is closest to:

A.- $8,500

B.- $9,500

C.- $10,500

D.- $11,500

3.Consider the following information:

Expected dividend next period = $2.00

Required return by common share investors = 9.00%

Forecast long-run growth rate = 3.00%

The price per share of stock for this company is closest to:

A.$16.67

B.$22.22

C.$33.33

D.$66.67

4.Assume acompany's retention rate is 60 percent, its cost of equity capital is 10 percent, its forecasted earnings per share are $3.00, and its ROE is 12 percent.The company's expected growth rate is closest to:

A.4.80%

B.6.00%

C.7.20%

D.10.00%

E.12.00%

5.Assume the beta for a company's stock is 2.00 and that the risk-free rate is 4.5 percent, whereas the expected return on the market is 10.0 percent. The market risk premium is closest to:

A.4.50%

B.5.50%

C.9.00%

D.10.00%

E.15.50%

6.The Trumpet Corporation has a capital structure consisting of 30 percent debt and 70 percent common equity. The financial managers of Trumpet believe that these capital proportions represent the company's target capital structure.If Trumpet were to issue new debt, it expects this debt will yield 8 percent. Currently, Trumpet's stock is trading at $30 per shares, the current dividend is $1 per share, and Trumpet's financial managers believe that this dividend will grow at a rate of 3 percent per year.If Trumpet's weighted average cost of capital is closest to:

A.4.487%

B.5.817%

C.6.063%

D.6.903%