On January 1, 2020, Oriole Ltd. issued 1,040 5-year, 11% convertible bonds at par of $1,000,...

On January 1, 2020, Oriole Ltd. issued 1,040 5-year, 11% convertible bonds at par of $1,000, with interest payable each December 31. Each bond is convertible into 100 common shares, and the current fair value of each common share is $6. Similar straight bonds carry an interest rate of 13%. (a) Calculate the PV of the debt component by itself. Calculate using any of the following methods:

(1) factor tables,

(2) a financial calculator, or

(3) Excel function PV

. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answers to 0 decimal places, e.g. 5,275.)

PV of the debt component $enter ___________ PV of the debt component in dollars rounded to 0 decimal places

Solutions

Expert Solution

Ans:

Year	Cash Flow	PVF @13%	Present Value
1	114,400.00	0.88496	101,239
2	114,400.00	0.78315	89,592
3	114,400.00	0.69305	79,285
4	114,400.00	0.61332	70,164
5	114,400.00	0.54276	62,092
	Debt Component	402,371

Debt Component is $402,371

ekkarill92 answered 1 year ago

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