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The XLarge Corporation has a convertible bond outstanding with a conversion ratio of 20. The common stock is selling for $48.00. The convertible bond is selling for $1,160.00. SHOW ALL WORK FOR CREDIT
a) What is the conversion value? __________
b) What is the conversion premium? ________
c) What is the conversion price? ____________
d) If the common stock falls to $45, and the pure bond price is $890, will the bond sell for greater than its conversion value?
e) Why do firms offer convertible bonds? (discuss)
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Reversing Rapids Co. purchases an asset for $182,837. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%, 19.20%, and 11.52% respectively. Reversing Rapids has..
General Mills has a $1,000 par value, 12-year to maturity bond outstanding with an annual coupon rate of 8.34 percent per year, paid semiannually. Market interest rates on similar bonds are 9.64 percent. Calculate the bond’s price today.
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