The conversion ratio of the debenture.

Question

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Answer 1

Question

Chapter 24, Problem 8PS

a)

Summary Introduction

To determine: The conversion ratio of the debenture.

b)

Summary Introduction

To determine: The conversion price.

c)

Summary Introduction

To determine: The conversion value.

d)

Summary Introduction

To determine: The stock price at which conversion value will be equal to the bond value.

e)

Summary Introduction

To determine: Whether the market price will be less than the conversion value.

f)

Summary Introduction

To determine: The amount that the convertible holder paying for the option to buy one share of common stock.

g)

Summary Introduction

To determine: The rise in common stock by 2020.

h)

Summary Introduction

To determine: The time at which company M call the debenture.

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Maple Aircraft has issued a 4¾% convertible subordinated debenture due 3 years from now. The conversion price is $47 and the debenture is callable at 102.75% of face value. The market price of the convertible is 91% of face value, and the price of the common is $41.50. Assume that the value of the bond in the absence of a conversion feature is about 65% of face value. In the absence of the conversion feature, what is the current yield and yield to maturity? What is the conversion ratio of the debenture? If the conversion ratio were 50, what would be the conversion price? What is the conversion value? At what stock price is the conversion value equal to the bond value? Can the market price be less than the conversion value? How much is the convertible holder paying for the option to buy one share of common stock? . By how much does the common have to rise after three years to justify conversion? please explain in full detail.Thank you.

Mercedes Company issued P 10,000,000 face value 12% convertible bonds at 110 on January 1,2020, maturing on January 1, 2025 and paying interest semiannually on January 1 and July 1. It is estimated the bonds would sell only 105 without the conversion feature. Each P1,000 bond is convertible into 10 ordinary shares with P100 par value. What is the increase in shareholders equity arising from the issuance of the convertible bonds on January 1,2020?A. 350,000B. 500,000C. 1,000,000D. Zero What would be the entry to record the issuance of the bonds payable?A. Cash 11,000,000 Bonds Payable 10,000,000 Premium bonds payable 500,000 Share premium privilege 500,000 B. Cash 11,000,000 Bonds Payable 10,000,000 Premium bonds payable 650,000 Share premium-conversion privilege 350,000 C. Cash 11,000,000 Bonds Payable 10,000,000 Premium bonds payable 350,000 Share premium-conversion privilege 650,000 D. Cash 11,000,000 Bonds Payable…

Mercedes Company issued P 10,000,000 face value 12% convertible bonds at 110 on January 1,2020, maturing on January 1, 2025 and paying interest semiannually on January 1 and July 1. It is estimated the bonds would sell only 105 without the conversion feature. Each P1,000 bond is convertible into 10 ordinary shares with P100 par value. 1. What is the increase in shareholders equity arising from the issuance of the convertible bonds on January 1,2020?a. 350,000b. 500,000c. 1,000,000d. Zero 2. What would be the entry to record the issuance of the bonds payable?a. Cash 11,000,000 Bonds Payable 10,000,000 Premium bonds payable 500,000 Share premium-conversion privilege 500,000 B. Cash 11,000,000 Bonds Payable10,000,000 Premium bonds payable 650,000 Share privilege350,000 C. Cash 11,000,000 Bonds Payable 10,000,000 Premium bonds payable 350,000 Share premium-conversion privilege 650,000 D.Cash11,000,000 Bonds Payable 10,000,000…

Answer 2

Question

Chapter 24, Problem 8PS

a)

Summary Introduction

To determine: The conversion ratio of the debenture.

b)

Summary Introduction

To determine: The conversion price.

c)

Summary Introduction

To determine: The conversion value.

d)

Summary Introduction

To determine: The stock price at which conversion value will be equal to the bond value.

e)

Summary Introduction

To determine: Whether the market price will be less than the conversion value.

f)

Summary Introduction

To determine: The amount that the convertible holder paying for the option to buy one share of common stock.

g)

Summary Introduction

To determine: The rise in common stock by 2020.

h)

Summary Introduction

To determine: The time at which company M call the debenture.

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Answer 3

Question

Chapter 24, Problem 8PS

a)

Summary Introduction

To determine: The conversion ratio of the debenture.

b)

Summary Introduction

To determine: The conversion price.

c)

Summary Introduction

To determine: The conversion value.

d)

Summary Introduction

To determine: The stock price at which conversion value will be equal to the bond value.

e)

Summary Introduction

To determine: Whether the market price will be less than the conversion value.

f)

Summary Introduction

To determine: The amount that the convertible holder paying for the option to buy one share of common stock.

g)

Summary Introduction

To determine: The rise in common stock by 2020.

h)

Summary Introduction

To determine: The time at which company M call the debenture.

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Answer 4

Question

Chapter 24, Problem 8PS

a)

Summary Introduction

To determine: The conversion ratio of the debenture.

b)

Summary Introduction

To determine: The conversion price.

c)

Summary Introduction

To determine: The conversion value.

d)

Summary Introduction

To determine: The stock price at which conversion value will be equal to the bond value.

e)

Summary Introduction

To determine: Whether the market price will be less than the conversion value.

f)

Summary Introduction

To determine: The amount that the convertible holder paying for the option to buy one share of common stock.

g)

Summary Introduction

To determine: The rise in common stock by 2020.

h)

Summary Introduction

To determine: The time at which company M call the debenture.

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Answer 5

Chapter 24, Problem 8PS

a)

Summary Introduction

To determine: The conversion ratio of the debenture.

b)

Summary Introduction

To determine: The conversion price.

c)

Summary Introduction

To determine: The conversion value.

d)

Summary Introduction

To determine: The stock price at which conversion value will be equal to the bond value.

e)

Summary Introduction

To determine: Whether the market price will be less than the conversion value.

f)

Summary Introduction

To determine: The amount that the convertible holder paying for the option to buy one share of common stock.

g)

Summary Introduction

To determine: The rise in common stock by 2020.

h)

Summary Introduction

To determine: The time at which company M call the debenture.

Answer 6

Chapter 24, Problem 8PS

a)

Summary Introduction

To determine: The conversion ratio of the debenture.

Answer 7

Chapter 24, Problem 8PS

a)

Summary Introduction

To determine: The conversion ratio of the debenture.

Answer 8

b)

Summary Introduction

To determine: The conversion price.

Answer 9

b)

Summary Introduction

To determine: The conversion price.

Answer 10

c)

Summary Introduction

To determine: The conversion value.

Answer 11

c)

Summary Introduction

To determine: The conversion value.

Answer 12

d)

Summary Introduction

To determine: The stock price at which conversion value will be equal to the bond value.

Answer 13

d)

Summary Introduction

To determine: The stock price at which conversion value will be equal to the bond value.

Answer 14

e)

Summary Introduction

To determine: Whether the market price will be less than the conversion value.

Answer 15

e)

Summary Introduction

To determine: Whether the market price will be less than the conversion value.

Answer 16

f)

Summary Introduction

To determine: The amount that the convertible holder paying for the option to buy one share of common stock.

Answer 17

f)

Summary Introduction

To determine: The amount that the convertible holder paying for the option to buy one share of common stock.

Answer 18

g)

Summary Introduction

To determine: The rise in common stock by 2020.

Answer 19

g)

Summary Introduction

To determine: The rise in common stock by 2020.

Answer 20

h)

Summary Introduction

To determine: The time at which company M call the debenture.

Answer 21

h)

Summary Introduction

To determine: The time at which company M call the debenture.

Answer 22

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Answer 23

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Answer 24

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Answer 25

Ch. 24 - Bond terms Select the most appropriate term from...Ch. 24 - Sinking funds For each of the following sinking...Ch. 24 - Security and seniority a. As a senior bondholder,...Ch. 24 - Prob. 4PS Ch. 24 - Prob. 5PS Ch. 24 - Private placements Explain the three principal...Ch. 24 - Prob. 7PS Ch. 24 - Prob. 8PS Ch. 24 - Convertible bonds True or false? a. Convertible...Ch. 24 - Prob. 10PS

The conversion ratio of the debenture.

Solution Summary: The author determines the conversion ratio of the debenture and the stock price at which it will be equal to the bond value.

To determine: The conversion ratio of the debenture.

To determine: The conversion price.

To determine: The conversion value.

To determine: The stock price at which conversion value will be equal to the bond value.

To determine: Whether the market price will be less than the conversion value.

To determine: The amount that the convertible holder paying for the option to buy one share of common stock.

To determine: The rise in common stock by 2020.

To determine: The time at which company M call the debenture.

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Chapter 24 Solutions