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Hello, can you please explain with more details these questions? Thans you in advance
If it is not too much trouble, more detail calaculation.How did they get those numbers, because I am stuck with this question.Did watch lectures all the way. Thank you!
If you have watched the lectures then I do not understand what the problem is, because I work through a very similar example in the lectures.
The conversion is to 8 shares in 7 years time. The shares have a current MV of $10.90 and the share price is expected to grow at 6% per year.
So in 7 years time the price will be 10.90 x (1.06^7) and the conversion value is 8 times this.For question 18, the market value is the PV of future receipts discount at the investors required rate of return. The receipts on $100 nominal are interest of $8 per year for 7 years (because the question says they are 8% loan notes) and then the conversion amount of $126.15 given in the question. These are discounted at the 9% given in the question.
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