Compute the debt and equity components of the convertible

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Convertible notes issue including financial liability at amortized cost

On 1 July 2015 Sunshine Ltd issues convertible notes with a face value of $20 million. The convertible notes have a 12-year term and mature on 30 June 2027. Interest is payable annually in arrears, 30 June each year. The coupon rate of interest is 9% annually. At around the same point in time, companies with a similar credit rating issue debt security without a conversion option with a coupon rate of 13% payable annually.

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Question 1: Determine the debt and equity components of the convertible notes issued using the residual valuation method.

Reference no: EM132573605

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