Question: Problem 7: Deep Discount Bonds ABC Enterprises recently sold an issue of 10-year maturity bonds. The bonds were sold at a deep discount price of

Problem 7: Deep Discount Bonds ABC Enterprises recently sold an issue

of 10-year maturity bonds. The bonds were sold at a deep discount

Problem 7: Deep Discount Bonds ABC Enterprises recently sold an issue of 10-year maturity bonds. The bonds were sold at a deep discount price of P615 each. After flotation costs, ABC received P604.50 each. The bonds have a P1,000 maturity value and pay P50 interest at the end of each year. If the total face value of the bonds issued is 496,277,915.6, what amount of fund is usable? (2 points) Problem 8: Convertible Bonds Find the conversion price for a convertible P1,000 bond with a conversion ratio of 15. The market price of the common stock is P47.00 per share. (2 points) Problem 9: Convertible Bonds Find the conversion price of a convertible P1,000 bond, convertible into common stock at P20.00 per share. The market price of the common stock is P18.00 per share. (2 points) Problem 10: Convertible Bonds A convertible P1,000 bond has a conversion ratio of 15. The market price of the common stock is P47.00 per share. The bond is quoted at the market at P846. A. What is the conversion premium? (2 points) B. At what percentage should the share price rise so the conversion right become attractive? (2 points) Problem 11: Convertible Bonds ABC has issued a P100 convertible bond and a coupon rate of interest of 10% payable yearly. The bond may be converted into 40 ordinary shares of ABC in three years' time. The bond if not converted will be redeemed at 110. Estimate the likely current market price for P100 of the bonds, if investors in the bonds now require a pre-tax return of only 8%, and the expected value of ABC ordinary shares on the conversion day is: A. P2.50 per share (2 points) B. P3.00 per share (2 points) Problem 12: Equity Finance ABC has a capital budget requiring an investment of P4 million over the year and it desires to maintain its present debt to total assets (debt ratio) of 0.40, how much external equity must it raise? Assume ABC's capital structure includes only common equity and debt, and that debt and equity will be the only sources of funds to finance capital projects over the year. (2 points)

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