What was the value per bond of the conversion feature

Reference no: EM13300679

Fifteen years ago, Roop Industries sold $ 400 million of convertible bonds. The bonds had a 40-year maturity, a 5.75% coupon rate, and paid interest annually. They were sold at their $ 1000 par value. The conversion price was set at $ 62.75, and the common stock price was $55 per share.The bonds were subordinated debentures and were given an A rating; straight nonconvertible debentures of the same quality yielded about 8.75 At the time Roop's bonds were issued.

A) Calculate the premium on the bonds-that is, the percentage excess of the conversion price over the stock price at the time of the issue.

B) what is Roop's annual before-tax interest savings on the convertible issue versus a straight-debt issue?

C) At the time the bonds were issued, what was the value per bond of the conversion feature?

Reference no: EM13300679

Questions Cloud

Did they survive in the long run : Was it an unfortunate event that nobody could reasonably foresee? Did the organization recover? Did they survive in the long run? Identify means and methods of reducing the damage potential from a repeat incident.

Explain one frequently observes the formation of a blck : In heating an organic compound strongly with metallic sodium, one frequently observes the formation of a blck material, which is insoluble in water

What type of aquifer material do expect in the location : A dye test reveals that the specific discharge between the two wells is about 2.75 m/day. if the wells are 45m apart, What type of aquifer material do you expect in this location

How many times does the diaphragm move back and forth : A loud speaker diaphragm is producing a sound for 2.5s by moving back and forth in simple harmonic motion. How many times does the diaphragm move back and forth

What was the value per bond of the conversion feature : Calculate the premium on the bonds-that is, the percentage excess of the conversion price over the stock price at the time of the issue.

What is the tax effect of selling the old machine : The company's tax rate is 35% Working capital is expected to increase by $3,000 at the inception of the project, but this amount will be recaptured at the end of year five. What is the tax effect of selling the old machine?

What is the maximum distance away that the navigation lights : What is the maximum distance away that the navigation lights can still be seen by an observer standing at the shoreline The observer's eye height is 5'6" and the uppermost navigation light is 168 above the water.

Calculate the new period of oscillation : The pendulum is now swinging on Pluto. Calculate the new period of oscillation in terms of T, knowing that on Pluto the gravity is 1/16 of gravity on the Earth

Explain what is the ph of a buffer that results nahco2 : What is the pH of a buffer that results when 0.40 mol NaHCO2 is mixed with 100.0 mL of 2.00 M HCl and diluted with water to 250 mL (Ka of HCO2H=1.8*10^-4.

User Account

All Pages