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Hi Mike!
I have some issues concerning compound instrument.
1.I do have understood that CI has an element of a liability and equity and I have understood the logic behind.
2. However, my issue is the logic/ideas behind the calculation of the liability and equity. The calculations are ok for me but the reasoning behind is not. Could you please explain it?
Thanks.
If the present value of the loan element of the $30,000 combined instrument is $28,530, the remaining $1,470 must relate to something other than the loan element
Where else might you suggest as an appropriate home for this 1,470?
It is certainly equity related because the instrument is convertible into equity at some time in the future
So that’s why it goes to equity now
OK?
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