hybrid costing9

hybrid costing9 - Warrants and yield on straight debt i ....

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Warrants and yield on straight debt Answer: b Diff: M i . Himes Beverage Co. recently issued 10-year bonds at par ($1,000) with a 6 percent annual coupon. The bonds also have 15 warrants attached, and each warrant is worth $10. If Himes were to instead issue 10- year straight debt with no warrants attached, what would be the yield? a. 6.00% b. 8.26% c. 8.78% d. 9.16% e. 10.00% Convertibles Answer: b Diff: M ii . Florida Enterprises is considering issuing a 10-year convertible bond that will be priced at its $1,000 par value. The bonds have an 8 percent annual coupon rate, and each bond can be converted into 20 shares of common stock. The stock currently sells at $40 a share, has an expected dividend in the coming year of $5, and has an expected constant growth rate of 5 percent. What is the estimated floor price of the convertible at the end of Year 3 if the required rate of return on a similar straight-debt issue is 10 percent?
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This note was uploaded on 08/04/2011 for the course COMM 101 taught by Professor Sy during the Spring '11 term at USC.

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hybrid costing9 - Warrants and yield on straight debt i ....

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