Principles of Corporate Finance
13th Edition
ISBN: 9781260465099
Author: BREALEY, Richard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 24, Problem 21PS
Convertible bonds Zenco Inc. is financed by 3 million shares of common stock and by $5 million face value of 8% convertible debt maturing in 2029. Each bond has a face value of $1,000 and a conversion ratio of 200. What is the value of each convertible bond at maturity if Zenco’s net assets are worth:
- a. $30 million?
- b. $4 million?
- c. $20 million?
- d. $5 million?
Draw a figure similar to Figure 24.4c showing how the value of each convertible bond at maturity varies with the value of Zenco’s net assets.
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Review
Coupon interest rate…
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The Airfoil Aircraft Company has issued 5% convertible bonds that mature October 1, 2029. Suppose the bonds are issued October 1, 2021, and pay interest each April 1 and October 1.
(Click the icon to view the bond data.)
Read the requirements.
Requirement 1. Assume the bonds are issued at a price of 93.4. Using the straight-line method of amortization for bond discount:
a. Calculate interest expense on bonds payable for each semiannual interest payment period. Use two decimal places. (Round intermediary and final calculations to the nearest cent.)
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Use the paper copy of the Present Value Tables, provided on Canvas, to answer the following question
Williams Company issued 200 of its B, $1,000, 5-year bonds on January 1, 2023. On that date, the market rate of interest was 12%. The bonds pay interest quarterly How much
would an investor pay for this bond?
Select one
O a $150,000
Ob $170,308
O C$150,066
d $114129
e $107.973
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Chapter 24 Solutions
Principles of Corporate Finance
Ch. 24 - Bond terms Use Table 24.1 (but not the text) to...Ch. 24 - Bond terms Look at Table 24.1: a. The AMAT bond...Ch. 24 - Bond terms Select the most appropriate term from...Ch. 24 - Prob. 5PSCh. 24 - Bond terms Bond prices can fall either because of...Ch. 24 - Security and seniority a. As a senior bondholder,...Ch. 24 - Prob. 8PSCh. 24 - Prob. 9PSCh. 24 - Security and seniority a. Residential mortgages...Ch. 24 - Sinking funds For each of the following sinking...
Ch. 24 - Call provisions a. Look at Table 24.1. Suppose...Ch. 24 - Covenants Alpha Corp. is prohibited from issuing...Ch. 24 - Prob. 14PSCh. 24 - Private placements Explain the three principal...Ch. 24 - Convertible bonds True or false? a. Convertible...Ch. 24 - Convertible bonds Maple Aircraft has issued a 4%...Ch. 24 - Convertible bonds The Surplus Value Company had 10...Ch. 24 - Prob. 19PSCh. 24 - Convertible bonds Iota Microsystems 10%...Ch. 24 - Convertible bonds Zenco Inc. is financed by 3...Ch. 24 - Prob. 22PSCh. 24 - Prob. 23PSCh. 24 - Bank loans, commercial paper, and medium-term...Ch. 24 - Prob. 25PSCh. 24 - Tax benefits Dorlcote Milling has outstanding a 1...Ch. 24 - Convertible bonds This question illustrates that...Ch. 24 - Prob. 28PS
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