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Florida Enterprises is considering issuing a 10-year convertible bond that will be priced at its $1000 par value. The bonds have an 8% annual coupon, and each bond can be converted into 20 shares of common stock. The stock currently sells at $40 a share, has an expected dividend in the coming year of $5, and has an expected constant growth rate of 5%. Similar straight-debt issues yield 10%. The company will force conversion on the bonds as soon as (year-end) the conversion value exceeds the par value on the bonds. The firm is in the 40% marginal tax rate.
a) Compute the price of the straight bond component and the conversion value in Year 3.
b) When will conversion take place?
c) Compute the yield to the investors and the cost to the firm from the convertible bonds.
Super carpeting Inc just paid a deidend (Do) of $3.12, and its dividend is expected to grow ata constant rate (g) of 6.5% per year. if the required (rs) on Super's stock is 16.25%, what is the intrinsic value of Super's shares?
List and Describe at least five stakeholders in the health care payer system - Cash flow and a source of value
Using the annual report of CVS stores and other sources such as a 10k or 10q’s, discuss the dividend policy of your company. How would you describe your chosen company’s dividend policy? Why do you believe this company chose the dividend policy they ..
A firm has a long-term debt–equity ratio of 0.55. Shareholders’ equity is $1.4 million. Current assets are $425,000, and total assets are $2.420 million. If the current ratio is 1.7, what is the ratio of debt to total long-term capital?
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $760 per set and have a variable cost of $320 per set. The company has spent $126,000 for a marketing study that determined the company will sell 24,000 sets per year ..
Who is responsible for the make-or-buy decision and what other suggestions can you make for improving the situation at Donley Brothers
Consider the following spot interest rates for maturities of one, two, three, and four years. r1 = 4.6% r2 = 5.2% r3 = 5.9% r4 = 6.7% Assuming a constant real interest rate of 2 percent, what are the approximate expected inflation rates for the next ..
User chargers link funds produced to particular public services-individuals pay only for the services they actually use. Why doesn't all government funding come from such freewill transactions and market exchange?
KADS, Inc., has spent $350,000 on research to develop a new computer game. The firm is planning to spend $150,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $45..
You have purchased a call option contract on Smith & Smith common stock. The option contract is for 100 shares. The option has an exercise price of $ 43.00 and S&S’s stock currently trades at $40.00. The option premium is quoted at $ 2.00. If the sto..
Cisco Systems had net income of $4.401 billion and, at year end, 6.735 billion shares outstanding. In addition, the company’s EBITDA was $6.834 billion and its share price was $22.36. Compute the firm's price earnings ratio and the price-EBITDA ratio..
americas current account ca deficit the trade deficit plus net income payments and netunilateral transfers rose as a
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