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Calculate the current value of the bonds

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A listed company Maua Ltd is partly financed by 7% corporate bonds, which are redeemable at their nominal value of Ksh100 per bond in eight years' time. Alternatively, the bonds are convertible after seven years into 11 ordinary shares of Maua Ltd per bond. The ordinaryshares of Maua are currently trading at Ksh6·50 per share. The current cost of debt of the convertible bonds is 8%. Calculate the current value of the bonds of Maua Ltd, using futureshare price increases of: (i) 4% per year (ii) 6% per year.

Reference no: EM133068134

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