Answer:
a. $880.74
b. 13 years
Explanation:
a. Conversion ratio = Current Value of bond / Conversion price = 1,000 / 93.4 = 10.71
Conversion price of bond = 10.71 × 28.60 = $306.31
Coupon = Par value of bond * Coupon rate = $1,000 * 6.4% = $64
Present value of straight debt is calculated below:
Present Value = $64 × [1-(1+7.4%)^-30 / 7.4%] + [$1,000 / (1+7.4%)^30]
= $64*11.93 + $117.46
= $763.28 + $117.46
= $880.74
.
Therefore, the minimum value of bond is $880.74
b. Conversion ratio = 10.71
Current stock price = $28.6
Suppose number of year the stock will take to reach above $1,140 is t.
Conversion value = Current stock price * Conversion ratio*(1+10.8%)^t
$1,140 = $28.6 * 10.71 * (1.108)^t
(1.108)^t = 3.7218
t = 12.8145 year.
t = 13 years
Answer:
There will be 7 months of repayment for fully paying-off the outstanding amount.
Explanation:
We apply the present value formula to calculate the number of month it takes to paid off the outstanding amount.
We have:
Monthly payment = $400; Discounting period = number of months needs to paid off the amount; Discount rate = 13.99%/12
So, we have: 2,455.44 = [400/(13.99%/12)] x [1 - (1+13.99%/12)^(-n)] <=> [1 - (1+13.99%/12)^(-n)] = 0.071566 <=> (1+13.99%/12)^(-n) = 0.928434 = <=> n = 6.4
=> There will be 7 months of repayment for fully paying-off the outstanding amount.
Answer: Internal reporting involves the compilation of financial and operational information on a frequent basis, which is distributed to those within an organization who can use it to improve performance. ... Internal reports are not shared with anyone outside of the firm.
Answer:
3.73%
Explanation:
The computation of the rate of interest that makes the equivalent is shown below:
As we know that
Present value=Cash flow × Present value discounting factor ( interest rate% , time period)
Let us assume the interest rate be x
where,
Present value of $400,000 is
= $400,000 ÷ 1.0x ^5
And,
Present value of $1,000,000 be
= $1,000,000 ÷ 1.0x^30
Now eqaute these two equations
$400,000 ÷ 1.0x^5 = $1,000,000 ÷ 1.0x^30
(1.0x^30) ÷ (1.0x^5) = $1,000,000 ÷ $400,000
1.0x^(30 - 5)=2.5
1.0x^25=2.5
1.0x = (2.5)^(1 ÷ 25)
x =1.03733158 - 1
= 3.73%
Answer:
Segregation of duties
Explanation:
Internal Controls are set of rules and guidelines that are followed to ensure effectiveness of business operations. The main risk in the business is weak internal controls. There are some organizations with strong internal controls but implementation of such controls is a challenge for organizations. There are human errors, IT security risks, fraud and compliance risk.
The risks associated with Olive limited is that there is no segregation of duties, Richard Palm is preparing journal vouchers, posts the journal vouchers and reconciles the balance himself. If he makes an error in recording a transaction there is no one who reviews his work and can identify an error. Also if Richard is involved in a fraud and collaborates with purchase department or sales department staff, he can pass a transaction without any supervision.
