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City Tire has issued 100 convertible bonds with a conversion ratio of 20. Currently the bonds have not been converted and City Tire has 3,000 shares of common stock outstanding. (a) If the convertible bondholders convert their bonds into stock, how many shares of City Tire stock will be outstanding? (b) If the stock price is $30, what is the conversion value of the bonds? (c) The convertible bonds are approaching maturity. On the maturity date each bondholder who has not converted is entitled to a final payment of $1000. What is the lowest stock price at which a convertible bondholder would find it in his/her interest to convert the bonds before they mature?
Nordyne inc.'s marketing sales director doesn't think that the market for the firm's goods is big enough to sell enough units to make the company's target operating profit of $20,000,000. in fact, she believes that the firm will be able to sell only ..
Calculate the call using the Black-Scholes model. Show all workings and what would be the price of a put with an exercise price of $120 and the same time until expiration? Show all workings.
Please indicate the impact on the Cash Account of the following corporate actions a) A dividend payment made from funds from a sale of debt b)Real estate being purchased with short term debt c) Inventory is bought on credit d)Interest on long term de..
Juicers Inc. is thinking of acquiring Fast Fruit Company. Juicers expects Fast Fruit's NOPAT to be $9 million the first year, with no net new investment in operating capital and no interest expense. For the second year, Fast Fruit is expected to have..
A stock with an annual standard deviation of 41 percent currently sells for $68. The risk-free rate is 6.1 percent. What is the value of a put option with a strike price of $81 and 62 days to expiration?
KeySpan Corp. is planning to issue debt that will mature in 2035. In many respects, the issue is similar to currently outstanding debt of the corporation. Using Table 11-3, identify: The yield to maturity on similarly outstanding debt for the firm, i..
Considering investing in a store with a 10 year lease and it will be in business for the next 10 years. It produces annual cash flows of $400,000. Discount rate 10%. Cash flows will grow at 5%. Therefore, expected annual cash flow for next year is 42..
Two alternatives are suggested for improvement to a power generation plant. Alternative A costs $60,000 and provides yearly benefit of $16,000. Alternative B requires $84,000 of initial cost. However, it will yield benefits in the order of $22,000 pe..
Aloha Inc. has 5.5 percent coupon bonds on the market that have 10 years left to maturity. If the YTM on these bonds is 6.42 percent, what is the current bond price?
An electronics firm invested $60,000 in a precision inspection device. It cost $4000 to operate and maintain in the first year and $3000 in each of the subsequent years. At the end of 4 years, the firm changed their inspection procedure, eliminating ..
Consider the choice between $25,000 today or $1,000 per year for 30 years, with investors caring only about the time value of money. Which of the following is true?
Kellner Motor Co.'s stock has a required rate of return of 12.50%, and it sells for $25.00 per share. Kellner's dividend is expected to grow at a constant rate of 6.00%. What was the last dividend, D0? Remember, give D0, not D1.
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