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In: Finance
Problem 19-12 Current yield on a convertible bond [LO19-1] The Olsen Mining Company has been very...
Problem 19-12 Current yield on a convertible bond [LO19-1]
The Olsen Mining Company has been very successful in the last
five years. Its $1,000 par value convertible bonds have a
conversion ratio of 36. The bonds have a quoted interest rate of 8
percent a year. The firm’s common stock is currently selling for
$48.50 per share. The current bond price has a conversion premium
of $10 over the conversion value.
a. What is the current price of the bond?
(Do not round intermediate calculations and round your
final answer to 2 decimal places.)
b. What is the current yield on the bond
(annual interest divided by the bond’s market price)? (Do
not round intermediate calculations. Input your answer as a percent
rounded to 2 decimal places.)
c. If the common stock price goes down to $25.90
and the conversion premium goes up to $100, what will be the new
current yield on the bond? (Do not round intermediate
calculations. Input your answer as a percent rounded to 2 decimal
places.)
Solutions
jeff jeffy answered 1 year agoRelated Solutions
The Olsen Mining Company has been very successful in the last five years. Its $1,000 par...
The Olsen Mining Company has been very successful in the last
five years. Its $1,000 par value convertible bonds have a
conversion ratio of 34. The bonds have a quoted interest rate of 9
percent a year. The firm’s common stock is currently selling for
$46.10 per share. The current bond price has a conversion premium
of $10 over the conversion value. a. What is the current price of
the bond? (Do not round intermediate calculations and round your
final...
Problem 19-14 EPS; convertible preferred stock; convertible bonds; order of entry [LO19-7, 19-9, 19-10] Information from...
Problem 19-14 EPS; convertible preferred stock; convertible
bonds; order of entry [LO19-7, 19-9, 19-10]
Information from the financial statements of Henderson-Niles
Industries included the following at December 31, 2018:
Common shares outstanding throughout the year
100
million
Convertible preferred shares (convertible into 36 million
shares of common)
75
million
Convertible 10% bonds (convertible into 23.0 million shares of
common)
$
2,800
million
Henderson-Niles’s net income for the year ended December 31, 2018,
is $960 million. The income tax rate is...
Problem 19-17 EPS; options; convertible preferred; additional shares [LO19-4, 19-5, 19-6, 19-7, 19-8, 19-9] On January...
Problem 19-17 EPS; options; convertible preferred; additional
shares [LO19-4, 19-5, 19-6, 19-7, 19-8, 19-9]
On January 1, 2018, Tonge Industries had outstanding 460,000
common shares ($1 par) that originally sold for $25 per share, and
5,000 shares of 10% cumulative preferred stock ($100 par),
convertible into 50,000 common shares.
On October 1, 2018, Tonge sold and issued an additional 12,000
shares of common stock at $35. At December 31, 2018, there were
21,000 incentive stock options outstanding, issued in 2017,...
Problem 19-18 EPS; stock options; nonconvertible preferred; convertible bonds; shares sold [LO19-4, 19-5, 19-6, 19-7, 19-8,...
Problem 19-18 EPS; stock options; nonconvertible preferred;
convertible bonds; shares sold [LO19-4, 19-5, 19-6, 19-7, 19-8,
19-9]
At January 1, 2018, Canaday Corporation had outstanding the
following securities:
720 million common shares
45 million 8% cumulative preferred shares, $50 par
4% convertible bonds, $4,500 million face amount, convertible into
90 million common shares
The following additional information is available:
On September 1, 2018, Canaday sold 81 million additional shares
of common stock.
Incentive stock options to purchase 40 million shares...
Exercise 19-22 (LO19-4, LO19-6) A new machine has just been installed to cut and rough-shape large...
Exercise 19-22 (LO19-4, LO19-6)
A new machine has just been installed to cut and rough-shape
large slugs. The slugs are then transferred to a precision grinder.
One of the critical measurements is the outside diameter. The
quality control inspector randomly selected five slugs each
half-hour, measured the outside diameter, and recorded the results.
The measurements (in millimeters) for the period 8:00 a.m. to 10:30
a.m. follow.
Outside Diameter (millimeters)
Time
1
2
3
4
5
8:00
87.3
87.3
88.1
87.0...
Exercise 19-22 (LO19-4, LO19-6) A new machine has just been installed to cut and rough-shape large...
Exercise 19-22 (LO19-4, LO19-6)
A new machine has just been installed to cut and rough-shape
large slugs. The slugs are then transferred to a precision grinder.
One of the critical measurements is the outside diameter. The
quality control inspector randomly selected five slugs each
half-hour, measured the outside diameter, and recorded the results.
The measurements (in millimeters) for the period 8:00 a.m. to 10:30
a.m. follow.
Outside Diameter (millimeters)
Time
1
2
3
4
5
8:00
87.3
87.5
88.0
87.1...
Yield to Maturity and Current Yield You just purchased a bond that matures in 12 years....
Yield to Maturity and Current Yield
You just purchased a bond that matures in 12 years. The bond has
a face value of $1,000 and has an 7% annual coupon. The bond has a
current yield of 5.74%. What is the bond's yield to maturity? Round
your answer to two decimal places.
Constant Growth Valuation
Boehm Incorporated is expected to pay a $3.80 per share dividend
at the end of this year (i.e., D1 = $3.80). The dividend
is expected...
Problem 19-12 EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend; options [LO19-4, 19-5, 19-6,...
Problem 19-12 EPS; nonconvertible preferred stock; treasury
shares; shares sold; stock dividend; options [LO19-4, 19-5, 19-6,
19-7, 19-8, 19-10]
On December 31, 2017, Dow Steel Corporation had 600,000 shares
of common stock and 300,000 shares of 8%, noncumulative,
nonconvertible preferred stock issued and outstanding. Dow issued a
4% common stock dividend on May 15 and paid cash dividends of
$400,000 and $75,000 to common and preferred shareholders,
respectively, on December 15, 2018.
On February 28, 2018, Dow sold 60,000 common...
(1 pt) A 14-year bond earns interest at 8.9 percent convertible semiannually and has a yield...
(1 pt) A 14-year bond earns interest at 8.9 percent convertible
semiannually and has a yield rate of 6.8 percent convertible
semiannually. If the book value immediately after the 7th coupon
payment is 1061.72 dollars, and the book value immediately after
the 11th coupon payment is 1060.07 dollars, what is the face value?
Note: Don't assume that the face value and redemption value are the
same.
Answer = dollars.
Problem 19-19 EPS; options; restricted stock; additional components for "proceeds" in treasury stock method [LO19-1, 19-2,...
Problem 19-19 EPS; options; restricted stock; additional
components for "proceeds" in treasury stock method [LO19-1, 19-2,
19-4, 19-8, 19-11]
Witter House is a calendar-year firm with 430 million common
shares outstanding throughout 2018 and 2019. As part of its
executive compensation plan, at January 1, 2017, the company had
issued 60 million executive stock options permitting executives to
buy 60 million shares of stock for $12 within the next eight years,
but not prior to January 1, 2020. The fair...
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