Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Break Even Period:
It is also important to compare the returns from the equity stock and the bond to determine the profitability of both investments. Assume that the dividend paid on equity we have seen above is Rs.0.75. That is, a current yield of 0.75/11 = 0.06818 or 6.82%. The bond, at 10%, will yield 10/117 = 0.08547 or 8.55%.
We note that holding the bond gives us a better return than the outright purchase of the common stock. Under these conditions, we try to calculate the number of years required to recover the conversion premium, which results due to different cash flows from the instruments. This period is referred to as the Break Even Period. It is calculated by the formula given below.
Break Even Period = Conversion premium/Interest Income
Break Even Period = = 2.8 years.
Till now we have been looking at a well-known model called the "Traditional Valuation Model".
In a more systematic manner,
Annual cash flow differential = Face amount x Coupon rate - Conversion value x Dividend yield
Scenario: ABC Company sells widgets in three varieties (blue, red, and yellow) but has lost money for the past three years. Competitive intelligence shows the Company's products
Reconstruction and effect on share price A listed company facing reconstruction (divestment, demerger, MBO etc) will have informed the stock market in advance and the share pri
A Certificate of Deposit (CD) can be defined as a negotiable promissory note, secure and short-term in nature. CDs are issued at a discount to the face value, the
When considering how working capital is funding it is useful to divide assets into permanent current assets, noncurrent assets and fluctuating current assets. Permanent current ass
If normal operating revenues are inadequate to repay the debt, liquidation of collateral may be necessary. Corporate bonds can be either secured or unsecured by c
What is the decision rule for accepting or rejecting proposed projects when using net present value? When going with the net present value decision rule any project with a net
Question: You have just been appointed the secretary of the ALM Committee (ALCO) of ABN Bank. The ALCO members have some queries relating to the liquidity risk faced by the ban
Country analysis and political risk Country analysis could use tools for example PEST factors in order to strategically analyse countries. Political risk
What are the negative consequences of a company holding too much cash? A company holding in excess of cash would be giving up the opportunity to invest more in income producing
A debt obligation that is issued and traded both in the US bond market and the Eurobond market is referred to as global bond. For an entity to issue global bonds,
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd