The tsetsekos company was planning to finance an expansion

Assignment Help Accounting Basics

Reference no: EM13597186

The Tsetsekos Company was planning to finance an expansion. The principal executives of the company all agreed that an industrial company such as theirs should finance growth by means of common stock rather than by debt. However, they felt that the current $42 per share price of the companys common stock did not reflect its true worth, so they decided to sell a convertible security. They considered a convertible debenture but feared the burden of fixed interest charges if the common stock did not rise enough in price to make conversion attractive. They decided on an issue of the convertible preferred stock, which would pay a dividend of $2.10 per share.

The conversion ratio will be 1.0; that is, each share of convertible preferred can be converted into a single share of common. Therefore, the convertibles par value (and also the issue price) will be equal to the conversion price, which in turn will be determined as a premium (i.e., the percentage by which the conversion price exceeds the stock price) over the current market price of the common stock. What will the conversion price be if it is set at a 10% premium? At a 30% premium?
Should the preferred stock include a call provision? Why?

Reference no: EM13597186

Questions Cloud

What product would you expect from reaction of cis-2-butene : what product would you expect from reaction of cis-2-butene with meta-chloro-peroxybenzoic acid? show the

Six-month t-bills have a nominal rate of 7 while default : six-month t-bills have a nominal rate of 7 while default free japanese bonds that mature in 6 months have a nominal

Accrued salaries of 4950 owed to employees for december 30 : accrued salaries of 4950 owed to employees for december 30 and 31 are not comsidered in preparing the financial

For a particular isomer of c8h18 the following reaction : for a particular isomer of c8h18 the following reaction produces 5113.3 kj of heat per mole of c8h18g consumed under

The tsetsekos company was planning to finance an expansion : the tsetsekos company was planning to finance an expansion. the principal executives of the company all agreed that an

Issuance and retirement of bonds income statement : issuance and retirement of bonds income statement presentation holiday company issued its 9 25-year mortgage bonds in

Earnings after taxes 580000 in year 2007 with 400000 : earnings after taxes 580000 in year 2007 with 400000 shares of common stock in 2008 the firm issued 35000 new shares

The change in the gibbs energy of a certain : a the change in the gibbs energy of a certain constant-pressure process was found to fit the expression deltagj -85.40

Include a description of the evidence the accounting : the audit report and internal control evaluation.bullresource pp. 62 amp 63 of ch. 3 in auditing and assurance

User Account

All Pages