Conversion provision: The conversion principle allows converting the bonds into the equity shares. The bonds are converted into equity shares on the basis of conversion ratio. The conversion ratio is the number of shares that will be received after the conversion of convertible bonds.
Call provision: The provision in which the issuer of the bonds is allowed to repurchase the bonds at a predetermined price before the date of maturity is called call provision. A call provision gives right to retire all outstanding bonds on a specific date known as the call date, for the call price that is specific to the issuance of the bond.
(a)
To determine:
The value of shares that the bondholders would receive per $1,000 bond if they are converted.
(b)
To determine:
The value that bondholders would receive per $1,000 bond under the call.
(c)
To determine:
Whether bondholder will convert the bond into shares or accept the call if the company call the bond.
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Fundamentals of Corp. Fin. (Looseleaf)(Custom)
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