Solution to fm12 ch 21 p08 build a model

Solution to FM12 Ch 21 P08 Build a Model
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Unformatted text preview: Chapter 21. Solution to Ch 21-08 Build a Model Amount to raise $25,000,000 Straight bond yield 9% Stock price now $23.00 Growth rate 6% Convertible par value $1,000.00 Coupon 8.00% Maturity (years) 20 years Convertible into n shares 35 shares Call protection (years) 5 years Call price $1,075.00 Call price decline per year after protection $5.00 per year 20% Niendorf Incorporated needs to raise $25 million to construct production facilities for a new type of USB memory de firms straight nonconvertible debentures currently yield 9%. Its stock sells for $23 per share and has an expected co growth rate of 6%. Investment bankers have tentatively proposed that the firm raise the $25 million by issuing conve debentures. These convertibles would have a $1,000 par value, carry a coupon rate of 8%, have a 20-year maturity, a convertible into 35 shares of stock. Coupon payments will be made annually. The bonds would be noncallable for 5 y which they would be callable at a price of $1,075; this call price would decline by $5 per year in Year 6 and each year...
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