Roza Corp. issues 1,500 convertible bonds at the beginning of 2019. The bonds have a four-year...

Transcribed Image Text:

Roza Corp. issues 1,500 convertible bonds at the beginning of 2019. The bonds have a four-year term with a stated rate of interest of 6 percent and are issued at par with a face value of 1,000 per bond (the total proceeds received from issuance of the bonds are 1,500,000). Interest is payable annually at December 31. Each bond is convertible into 250 ordinary shares with a par value of 1. The market rate of interest on similar non-convertible debt is 9 percent. Requirements: 1. Compute the liability component of Roza Corp.'s convertible debt at the date of issuance. answer this 2. Compute the Fair value of Equity component of Roza Corp.'s convertible debt at the date of issuance. The following present value factors are available: PV Ordinary Annuity-4 periods 6% 3.46511 9% 3.23972 PV of 1-4 periods 6% .79209 9% .70843 Roza Corp. issues 1,500 convertible bonds at the beginning of 2019. The bonds have a four-year term with a stated rate of interest of 6 percent and are issued at par with a face value of 1,000 per bond (the total proceeds received from issuance of the bonds are 1,500,000). Interest is payable annually at December 31. Each bond is convertible into 250 ordinary shares with a par value of 1. The market rate of interest on similar non-convertible debt is 9 percent. Requirements: 1. Compute the liability component of Roza Corp.'s convertible debt at the date of issuance. answer this 2. Compute the Fair value of Equity component of Roza Corp.'s convertible debt at the date of issuance. The following present value factors are available: PV Ordinary Annuity-4 periods 6% 3.46511 9% 3.23972 PV of 1-4 periods 6% .79209 9% .70843

Answer rating: 100% (QA)

1 Compute the liability component of Roza Corps convertible debt at the date of issuance The liabili... View the full answer