Craig's Cake Company has an outstanding issue of 13-year convertible bonds with a $800 par value. These bonds are convertible into 70 shares of common stock. They have a 12% annual coupon interest rate, whereas the interest rate on straight bonds of similar risk is 16%. a. Calculate the straight bond value of this bond. b. Calculate the conversion (or stock) value of the bond when the market price is $23 per share of common stock. c. What is the minimum market value of the bond?
Craig's Cake Company has an outstanding issue of 13-year convertible bonds with a $800 par value. These bonds are convertible into 70 shares of common stock. They have a 12% annual coupon interest rate, whereas the interest rate on straight bonds of similar risk is 16%. a. Calculate the straight bond value of this bond. b. Calculate the conversion (or stock) value of the bond when the market price is $23 per share of common stock. c. What is the minimum market value of the bond?
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 3EA: Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the...
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Craig's Cake Company has an outstanding issue of 13-year convertible bonds with a $800 par value. These bonds are convertible into 70 shares of common stock. They have a 12% annual coupon interest rate, whereas the interest rate on straight bonds of similar risk is 16%.
a. Calculate the straight bond value of this bond.
b. Calculate the conversion (or stock) value of the bond when the market price is $23 per share of common stock.
c. What is the minimum market value of the bond?
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