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Problem Calculation

The document provides various scenarios and calculations related to convertible bonds, including face values, conversion ratios, and prices. It discusses market values, conversion premiums, and the impact of conversion on stock ownership and company dilution. Additionally, it highlights the conditions under which investors should consider converting their bonds based on market conditions and values.

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thang113567
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4 views6 pages

Problem Calculation

The document provides various scenarios and calculations related to convertible bonds, including face values, conversion ratios, and prices. It discusses market values, conversion premiums, and the impact of conversion on stock ownership and company dilution. Additionally, it highlights the conditions under which investors should consider converting their bonds based on market conditions and values.

Uploaded by

thang113567
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

1,

Bond face Value Conversion ratio Conversion Price


1000 18.25 54.79

2,
Bond face Value Conversion Price Conversion ratio
1000 52.4 19.08

3,
Bond face Value Convertion Ratio Stock Price
1000 14.75 43.6

Conversion Price Conversion premium Percentage


67.80 24.197 55.50%

4,
Bond face Value Convert Ratio Stock Price Bond Value
1000 21.5 32.15 980

Conversion Ratio Conversion Price Conversion premium Conversion Value


21.5 46.51 14.36 691.23

5,
Convert Ratio Exercise price Stock Price
4 42 49

Minium Value
28

6,
Item Scenario A Scenario B

Face value of bond $1,000 $1,000

Straight value of
$875 $940
convertible bond

Market value of convertible


$980 $910
bond

Scenario A is more likely to happen because the market value is greater than the straight value

7,
Bond face Value Conversion Price Stock Price Market Price Con Bond
1000 80 72 995
Conversion Rate Min Value
12.5 900.000
The difference between the market price and the value can be explain by the option value. The investor pay an extra 95$=995

8,
Bond face Value Conversion Ratio Stock Price Call price
1000 21.6 59 108% of par value

Conversion Value Call price


1274.4 1080

The investor should convert

9,
Exercise price
48

Trading Price Lower Limit Upper Limit


44 0 44

Trading Price Lower Limit Upper Limit


57 9 57

10,
Bond Value Coupon rate Conversion price Stock Price
1000 6% 72 30

Min Value=Straight value of bond Conversion Rate Conversion Value Time (Year)
907.542406720776 13.8888888888889 1149.99958069635 11.780662043661

11,
# CEO Stock # Share Total bond face value Conversion Price
900,000 6,200,000 54,000,000 45

% CEO own # Shares after Conver % CEO own after converson


14.52% 7,400,000 12.16%

After the conversion the company had to issued new shares hence dilute the firm

12,
#Share Asset (ounces of plat) Plat worth Warrant fair price
15 18 920 920

Value of Company before warrant PPS


16560 1104

Value of company after warrant PPS


16560 1104
Value of Company after exercise PPS
17610 1100.625
Stock +2
734.23

er than the straight value

Price Con Bond


lue. The investor pay an extra 95$=995-900 for a waiting opportunity

For convert if conversion value greater than Required Return


1150 8%

Stock Price
51

Conversion Price
1050
`

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