ReviewViewAcrobatInsert Page LayoutN19GKHFDA132 Bernadette Naldo has been considering investing in the bonds of ABD Industries. The bondswere issued 5 years ago at their PhP1,000 par value and have exactly 25 years remaininguntil they mature. They have an 8% coupon interest rate, are convertible into 50 sharesof common stock, and can be called any time at PhP1,080. The bond is rated Aa.41ABD Industries, a manufacturer of sporting goods, recently acquired a small athletic-wear company that was in financial distress. As a result of the acquisition, rating agenciesthat inflation,are considering a rating change for ABD Bonds. Recent economic data suggecurrently at 5% annually, is likely to increase to 6% annual rate. Bernadette remainsinterested in the ABD bond but is concerned about inflation, a potential rating changeand maturity risk. In order to get a feel for the potential impact of these factors on the bondvalue, she decided to apply the valuation techniques she learned in her finance course.Required:a. If price of the common stock into which the bond is convertible rises to PhP30 per shareafter 5 years and the issuer calls the bonds at PhP1,080, should Bernadette let the bond beShot on OnePlus or should she convert it into common stock?Powered by Triple CameraFileHomeFormulasData

Some bonds have conversion option that they can be converted into number of shares as fixed or may…

Answered: nadette Naldo has been considering…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 13P

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Evaluating Annie Hegg's Proposed Investment in Atilier Industries Bonds Annie Hegg has been considering investing in the bonds of Atilier Industries. The bonds were issued 5 years ago at their $1,000 par value and have exactly 25 years remaining until they mature. They have an 8.0% coupon interest rate, are convertible into 50 shares of common stock, and can be called any time at $1,080.00. The bond is rated Aa by Moody's. Atilier Industries, a manufacturer of sporting goods, recently acquired a small athletic-wear company that was in financial distress. As a result of the acquisition, Moody's and other rating agencies are considering a rating change for Atilier bonds. Recent economic data suggest that expected inflation, currently at 5.0% annually, is likely to increase to a 6.0% annual rate. Annie remains interested in the Atilier bond but is concerned about inflation, a potential rating change, and maturity risk. To get a feel for the potential impact of these factors on the bond…
Evaluating Annie Hegg's Proposed Investment in Atilier Industries Bonds Annie Hegg has been considering investing in the bonds of Atilier Industries. The bonds were issued 5 years ago at their $ 1,000 par value and have exactly 25 years remaining until they mature. They have an 8.0 % coupon interest rate, are convertible into 50 shares of common stock, and can be called any time at $ 1,080.00. The bond is rated Aa by Moody's. Atilier Industries, a manufacturer of sporting goods, recently acquired a small athletic-wear company that was in financial distress. As a result of the acquisition, Moody's and other rating agencies are considering a rating change for Atilier bonds. Recent economic data suggest that expected inflation, currently at 5.0 % annually, is likely to increase to a 6.0 % annual rate. Annie remains interested in the Atilier bond but is concerned about inflation, a potential rating change, and maturity risk. To get a feel for the potential impact of these…
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