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Case chapter 6 Henri nurcahyo 张福亮 MA0N0231

Case chapter 6 Henri nurcahyo 张福亮 MA0N0231. Case description. Investor: Annie’s Hegg Bond’s issued by Atilier Industries Par Value $1000 with total maturity 30 years ( 25years remaining).

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Case chapter 6 Henri nurcahyo 张福亮 MA0N0231

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  1. Case chapter 6Henri nurcahyo张福亮MA0N0231

  2. Case description • Investor: Annie’s Hegg • Bond’s issued by Atilier Industries • Par Value $1000 with total maturity 30 years ( 25years remaining)

  3. 8% coupon interest rate , convertible into 50 shares of common stock, and can be called anytime at $ 1,080 • Inflation rate 5% is likely increase to a 6% annual rate/

  4. Question: • If the price of the common stock into which bond is convertible rises to $30/share after 5 years and the issuer calls the bonds at 1080. • Let the bond called away from her or should we convert it into commons stock??

  5. Answer : (1stway FV) • Stock par value : $1000/50stock = $20/stock • Value for future (next 25years): • B25 = $80 x(FVIFA6%,25yrs) + $1000x(FVIF6%,25yrs) =$80 x 54.8645 + $1000 x 2.4919 =$ 6881.06 • Called Bond issued at 1.080 • Convert to stock = ($20+30)* 50= $2,500 • Stock FVIF6%,25yrs = 2,500 x 4.2919 = $ 10729.75 • We should convert it in to common stock.

  6. answer: (2ndway NPV) • Stock par value : $1000/50stock = $20/stock • Bo = $80 x(PVIFA6%,25yrs) + $1000x(PVIF6%,25yrs) =$80x 12.7834 + $1000 x 0.233 =$ 1255.672 • Called Bond issued at 1.080 • Convert to stock = ($20+30)* 50= $2.500 • We should convert it in to common stock.

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