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In the summer of 2015, the Hadaway Company was planing to finance an expansion with a convertible security. It considered a convertible debenture but feared the burden of fixed interest charges if the common stock price did not rise enough to make conversion attractive. The firm decided on an issue of convertible preferred stock, which would pay a dividend of $1.02 per share. The common stock was selling for $21 a share at the time. Management projected earning for 2015 at 1.40 a share and expected a future growth rate of 12% per year in 2016 and beyond. The investment bankers and management agreed that the common stock would continue to sell at 15 times earnings, the current price/earnings ratio. What conversion price should the issuer set? The conversion rate will be 1.0; that is, each share of convertible preferred can be converted into 1 share of common. Therefore, the convertible's par value (as well as the issue price) will be equal to the conversion price of the common. Assume the present price should be in the range between 20% and 30% and the premium is 25%. Round your answer to the nearest cent. $ Should the preferred stock include a call provision? Why or why not? Round EPS and stock price to the nearest cent, round P/E ratio to the whole number. , to be able to force conversion if the market price rises above the call price. If, in fact, EPS rises to $ in 2020, and the P/E ratio remains at , the stock price will go to $ , making forced conversion possible.
I own 20 shares (for a firm total of 100 shares) and I am trying to fire the management. To appease me, the management has offered to purchase my 20 shares at $9 pershare. How would this change the value of your share?
Compare and Contrast Drafts and Promissory Notes. Be sure to include the identity of the parties on both instruments. In order to make a Draft or a Note an acceptable cash equivalent for commercial transactions, the paper must. Have all of the magica..
Jordan Jones (JJ) and Casey Carter (CC) are portfolio managers at your firm. Each manages a well-diversified portfolio. Your boss has asked for your opinion regarding their performance in the past year. JJ's portfolio has a beta of 0.6 and had a retu..
Kitty runs a brothel (illegal under state law) and has the following items of income and expense. What is the amount that she must include in taxable income from her operation?
What are the values of the output and the interest rate in 1999 when the money supply is 900? Sketch the AD curve and show what happens when the money supply is decreased below 900 in 1998.
Sisters Corp expects to earn $8 per share next year. The firm’s ROE is 15% and its plowback ratio is 60%. If the firm’s market capitalization rate is 10%. Calculate the price with the constant dividend growth model. Calculate the price with no growth..
The beranek company whose stock price in now $25 need to raise $20 million in common stock. Under writers have informed the firms management that they must price the new issue to the public at $22 per share because of signaling effects. How many shar..
A trader buys a call option with a strike price of $30 for $3. Does the trader ever exercise the option and lose money on the trade? Explain your answer.
Explain the increasing importance of utilizing non-financial measures of performance in managing an organization. What issues may managers encounter when attempting to utilize non-financial measures?
A 10-year maturity mortgage-backed bond is issued. The bond is a zero coupon bond that promises to pay $10,000 (par) after 10 years. At issue, bond market investors require a 15 percent interest rate on the bond. What is the initial price on the bond..
Tom has a $25000 loan that started April 1, 2015 where he pays $521.99 per month for 60 months. His interest rate is %9.06 and is compounded per month. if he pays $2750 in each August 2016, January 2017, August 2017, and January 2018. How much will T..
RAK, Inc., has no debt outstanding and a total market value of $180,000. Earnings before interest and taxes, EBIT, are projected to be $25,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 10 percen..
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