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Unformatted text preview: eams for these two plans,
and determine which plan would be preferable. Explain your answer.
LG4 ST 16–2 Finding convertible bond values Mountain Mining Company has an outstanding issue of convertible bonds with a $1,000 par value. These bonds are convertible into 40 shares of common stock. They have an 11% annual coupon interest
rate and a 25-year maturity. The interest rate on a straight bond of similar risk is
a. Calculate the straight bond value of the bond.
b. Calculate the conversion (or stock) value of the bond when the market price
of the common stock is $20, $25, $28, $35, and $50 per share.
c. For each of the stock prices given in part b, at what price would you expect
the bond to sell? Why?
d. What is the least you would expect the bond to sell for, regardless of the
common stock price behavior? PROBLEMS
LG2 16–1 Lease cash flows Given the lease payments and terms shown in the following
table, determine the yearly after-tax cash outflows for each firm, assuming that
lease payments are m...
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- Fall '13