財務(wù)管理：理論與實踐21show-文庫吧資料
2025-05-23 23:56本頁面
【正文】 onvertible will generally sell above its floor value prior to maturity because convertibility constitutes a call option that has value. 21 30 Copyright 169。 20xx Harcourt, Inc. All rights reserved. Conversion value = CVt = CR(P0)(1 + g)t. t = 0 CV0 = 40($20)()0 = $800. t = 10 CV10 = 40($20)()10 = $1,. What is the formula for the bond’s expected conversion value in any year? 21 28 Copyright 169。 20xx Harcourt, Inc. All rights reserved. What is (1) the convertible’s straight debt value and (2) the implied value of the convertibility feature? PV FV 20 12 105 1000 Solution: I/YR PMT N Straight debt value: 21 26 Copyright 169。 20xx Harcourt, Inc. All rights reserved. What conversion price (Pc) is built into the bond? Like with warrants, the conversion price is typically set 20%30% above the stock price on the issue date. $1,000 40 Pc = = = $25. Par value Shares received 21 24 Copyright 169。 D0 = $。 20xx Harcourt, Inc. All rights reserved. ?20year, % annual coupon, callable convertible bond will sell at its $1,000 par value。 20xx Harcourt, Inc. All rights reserved. ?When the warrants are exercised, there is a wealth transfer from existing stockholders to exercising warrant holders. ?But, bondholders previously transferred wealth to existing stockholders, in the form of a low coupon rate, when the bond was issued. 21 21 Copyright 169。 20xx Harcourt, Inc. All rights reserved. ?Here are the cash flows on a time line: 0 1 4 5 6 19 20 +1,000 100 100 100 100 100 100 1,000 1,100 Input the cash flows into a calculator to find IRR = %. This is the pretax cost of the bond and warrant package. (More...) 21 19 Copyright 169。 20xx Harcourt, Inc. All rights reserved. No. As we shall see, the warrants have a cost which must be added to the coupon interest cost. Because warrants lower the cost of the acpanying debt issue, should all debt be issued with warrants? 21 17 Copyright 169。 20xx Harcourt, Inc. All rights reserved. ?In a steppedup exercise price, the exercise price increases in steps over the warrant’s life. Because the value of the warrant falls when the exercise price is increased, stepup provisions encourage inthemoney warrant holders to exercise just prior to the stepup. ?Since no dividends are earned on the warrant , holders will tend to exercise voluntarily if a stock’s payout ratio rises enough. 21 15 Copyright 169。 20xx Harcourt, Inc. All rights reserved. ?The firm could have set lower interest payments whose PV would be smaller by $100 per bond, or it could have offered fewer warrants and/or set a higher exercise price. ?Under the original assumptions, current stockholders would be losing value to the bond/warrant purchasers. 21 13 Copyright 169。 20xx Harcourt, Inc. All rights reserved. Step 2: Find Coupon Payment and Rate N I/YR PV PMT FV 20 12 850 1000 Solve for payment = 100 Therefore, the required coupon rate is $100/$1,000 = 10%. 21 11 Copy
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