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What is the current market value of each

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Question - Toko Co has in issue 6% loan notes which are redeemable at their nominal value of 100 € in three year's time. Alternatively, each loan may be converted on that date into 30 ordinary shares of the company.

The current ordinary share price of Toko Co is 3.50 € and this is expected to grow at 4% p.a. for the foreseeable future. Toko Co has a pre-tax cost of debt 5% p.a.

What is the current market value of each 100 € convertible loan note?

a. 102.12 €

b. 107.06 €

c. 115.74 €

d. 118.46 €

Reference no: EM132948717

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