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A. Gregg Company recently issued two types of bonds. The first issue consisted of 20-year straight (no warrants attached) bonds with an 6% annual coupon. The second issue consisted of 20-year bonds with a 5% annual coupon with warrants attached. Both bonds were issued at par ($800). What is the value of the warrants that were attached to the second issue? Round your answer to the nearest cent.
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Convertibles
B. Petersen Securities recently issued convertible bonds with a $1,521 par value. The bonds have a conversion price of $39 per share. What is the bonds' conversion ratio, CR? Round your answer to the whole number.
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We have the X par bond paying a coupon rate of 8% and having a maturity of 20 years. If the coupon rate of X were to alter to 4%, what would the new duration be? What is the meaning of duration? Under what circumstances would duration equal maturity?
Cost of Equity The earnings, dividends, and common stock price of Shelby Inc. are expected to grow at 5% per year in the future. Shelby's common stock sells for $26.00 per share, its last dividend was $2.00, and the company will pay a dividend of $2...
Manufacturing USA has just signed a contract to buy equipment from German Car Industry, for 5,000,000 euros. The purchase was made in April with payment due three months later in July. Manufacturing USA's CEO is considering hedging strategies to redu..
Assume a bank loan requires an interest payment of $85 a year and principal payment of $1,000 at the end of the loan date/year life how much could this loan be sold for to another bank if the loans of similar quality care of a 8.5% interest rate that..
Acme Home Lending offers home equity loans up to 75% of the home value for its customers. If Sally Johnson has a home valued at $270,000 and a current mortgage of $81,000, how much can she borrow in a home equity loan from Acme?
Give an example of a situation where the management of a firm is acting in a manner that is contrary to the principal goal of financial management.
Evco, Inc., has a current price of $50 and will pay a $2 dividend in 1 year, and its equity cost of capital is 15%. What price must you expect it to sell for right after paying the dividend in 1 year in order to justify its current price?
Compact fluorescent lamps (CFLs) have become more popular in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent lightbulb costs $0.42 and lasts for 1,000 hours. what cost per kilowatt-hour does it make sense to rep..
Bond J has a coupon rate of 4.6 percent. Bond S has a coupon rate of 14.6 percent. Both bonds have nine years to maturity, make semiannual payments, and have a YTM of 10.2 percent. If interest rates suddenly rise by 2 percent, what is the percentage ..
Sharp Motor Company has two operating divisions—an Auto Division and a Truck Division. The company has a cafeteria that serves the employees of both divisions. The costs of operating the cafeteria are budgeted at $78,000 per month plus $0.80 per meal..
The earnings, dividends, and common stock price of Shelby Inc. are expected to grow at 5% per year in the future. Shelby's common stock sells for $29.50 per share, its last dividend was $1.80, and the company will pay a dividend of $1.89 at the end o..
You are valuing a toy store with a current growth rate of 18.2% which is expected to decline linearly over the next six years to constant rate of 4.1%. Similar firms have a current required rate of 9.6%. What is the value today if its current dividen..
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