Answer:
15.22%
Explanation:
The computation of the cost of equity is shown below:
Required return on assets = Weightage of debt × pre tax cost of debt + weightage of equity × cost of equity
where,
Weightage of debt is
= (Debt) ÷ (Debt + Equity)
= (0.64) ÷ (0.64 + 1)
= 0.39
And, the weightage of equity is
= (Equity) ÷ (Debt + Equity)
= (1) ÷ (0.64 + 1)
= 0.61
Now the cost of equity is
12.6% = 0.39 × 8.5% + 0.61 × cost of equity
12.6% = 3.315% + 0.61 × cost of equity
So, the cost of equity is 15.22%
<em>When convertible bonds are first issued </em>
- <em> the conversion price of the stock is higher than the market price.</em>
- <em>the coupon rate is lower than if the bond were not convertible.</em>
<h3>Why are convertible bonds issued?</h3>
Convertible bonds are issued by businesses to reduce their debt's coupon rate and postpone dilution. The number of shares an investor will receive in exchange for a bond depends on its conversion ratio. If the stock price is higher than if the bond were to be redeemed, companies can force the conversion of the bonds.
<h3>What is a convertible bond?</h3>
An interest-bearing fixed-income corporate debt asset known as a convertible bond has the option of being converted into a predetermined number of shares of common stock or equity. During the bond's term, the conversion from bond to stock is possible at specific times and is often at the bondholder's option.
<h3>What benefits do convertible bonds offer?</h3>
- The interest expense reductions from convertible bonds can be substantial.
- Convertible bonds often have lower interest rate payments than straight corporate bonds.
- The conversion option gives investors the chance to profit from gains in stock price, so they accept the reduced interest payments. May 10, 2021.
learn more about convertible bonds here <u>brainly.com/question/14954723</u>
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Answer:
November 1, 2016
Dr Cash 120,000
Cr Notes Payable 120,000
December 31, 2016
Dr Interest Expense 2,000
Cr Interest Payable 2,000
February 1, 2017
Dr Notes Payable 120,000
Dr Interest Payable 2,000
Dr Interest Expense 1,000
Cr Cash 123,000
Explanation:
Dunlin Development Company Journal entries
November 1, 2016
Dr Cash 120,000
Cr Notes Payable 120,000
December 31, 2016
Dr Interest Expense 2,000
($120,000 ×10% ×2/12)
Cr Interest Payable 2,000
February 1, 2017
Dr Notes Payable 120,000
Dr Interest Payable 2,000
Dr Interest Expense 1,000
(120,000×10%×1/12)
Cr Cash 123,000
Answer:
The correct answer is True.
Explanation:
This characteristic is important insofar as it allows the internalization exercise to be carried out, to ask oneself about the usefulness or convenience of a specific decision and, based on it, to take the course effectively and without distractions. This task allows genuine and sincere collaboration to be encouraged within a work group, and in this way reinforce teamwork for the benefit of all.
Answer:
The current price of the bond is $1,114.47
Explanation:
The computation of the current bond price is as follows:
Here we have to applied the present value formula by putting the following information
Given that
Par value = Future value = $1,000
NPER = (10 - 1) × 2 = 18
RATE = 6.5% ÷ 2 = 3.25%
PMT = $1,000 × 8.2% ÷ 2 = 41
The formula is given below:
= -PV(RATE;NPER;PMT;FV;TYPE)
After applying the above formula, the current price of the bond is $1,114.47
