Issue a P50-million convertible bond with the following terms: Issue date Face amount Nominal interest Interest payment

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Issue a P50-million convertible bond with the following terms: Issue date Face amount Nominal interest Interest payment Principal payment Tenor Denomination Conversion privilege September 1, 2022, Up to P50 million 7% Annual, every September 1 At maturity 5 years P10,000 per bond certificate Convert into the company’s shares of stock starting September 1, 2025, The convertible bond was issued at 98 and Free Shipping incurred bond issue costs of P500,000. Similar bonds without the conversion option are currently trading at 92.

• Finance capital expenditures by issuing a note payable to its long-time real estate supplier for the additional warehouses required by the project. Out of the total estimated project cost, the company budgeted P50 million for the new warehouses, which represents the value of the real properties when purchased in cash. The note payable will have the following terms: Issue date Face amount Nominal interest Principal payment Maturity date September 1, 2022, P57 million 0% (noninterest-bearing) Annual installment of P19 million September 1, 2025, The presentation to the company’s senior management and board of directors is fast approaching so William started preparing a slide deck containing a summary of his recommendation and all relevant information presented in a clear, straightforward, and organized manner. While doing so, he anticipated potential questions about the financial analysis he prepared.

6) Assuming that the company issued the 7% 5-year convertible bond with a face amount of P50 million on September 1, 2022. Subsequently, on September 1, 2025, all the bondholders exercised their conversion option to acquire 1 million shares in exchange for the bonds. Accrued interests to date were paid by the company in cash. The company’s shares have a par value of P45 per share and were trading at P52 at the time of conversion.

a. What is the balance of the unamortized premium (discount) as of the conversion date?

b. How much is the increase in shareholder’s equity due to the conversion?

Final Requirement: If you are William, what financing option/s would you recommend to Charles? Prepare a two-slide presentation containing your analysis and recommendation.