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A convertible bond has the following features:
Face Value: $1,000
Maturity: 20 years
Annual coupon: $80
Conversion Price: $80
Market Price of the Convertible Bond: $800
A) The bond may be converted into how many shares?B) What is the current value of the convertible as a bond if prevailing interest rates are 11%?C) What is the current value of the convertible as a stock if the current stock price is $60 per share?D) Based on (b) and (c), what is the premium reflected in the Market Price?E) If the stock price increases to $73 per share and the premium stays the same, what is the expected Market Price of the convertible?
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Assume that the interest rate on a one-year Treasury bill is 6 percent. and the rate on a two-year Treasury note is 7 percent.
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ABC wants to issue 12-year, zero coupon bonds that yield 8.73 percent. What price should they charge for these bonds if they have a par value of $1000? That is solve for PV. Assume compounding.
If its marginal tax rate is 40%, what is Heuser's tac cost of debt? Round your answer to two decimal places.
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