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The ex int market value of the convertible bonds is $21 million and the ex div market value of the preference shares is $6.25m
Q1) My question to you is that why in the answer they have found the MV per bond as 100*21/20? it should be the nominal 100 in Time 0?
Q2) Even for the preference shares 5%*10/6.25?
Why 10/6.25I can understand a question how to answer the Wacc, but this N/D is very hard for me ??
can u solve it, thnks in advanceQ1: The total nominal value of the bonds is $20M. So the number of $100 bonds is 20M/100 = 200,000. The total market value of the bonds is $21M, and therefore the MV of each bond = $21M / 200,000 = $105 (which is the same as the examiners answer).
Q2: There are 10M preference shares. The total MV is $6.25M and therefore the market value per share is $0.625. The dividend per share is 5c and therefore the cost of preference shares = 0.05/0.625 = 8%
OMG Thats melova, I usually say that for girls, but your explanation just made me so easy, why cant institute hire lectures like you?
Thnk u soo much 🙂 Now moving onto Business valuation and Risk management will finish questions within this weekHi i want to ask about the market value for bonds. should it be like this (total nominal value/ nominal value per share price x market value) but the answer is like this 21/20×100 . It should be multiply by 21 right because that is the market value. I dont understand
It makes no difference whether you calculate it the way you have written or whether you do what I have written in my previous reply to Q1.
$21M is the total market value of all the bonds, and the total nominal value is $20M. The nominal value of each bond is $100.Have you watched my free lectures on this?
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