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I have calculated the %age gain on dentro co share under cash and shares exchange offers.
But the the %age gain on dentro shares using 2% coupon bond exchange is not understood at all.
Please guide me in this regard, I will really appreciate your response.
God bless Opentution Team.
We assume that investors in the new bond will require the same return as investors are getting on the existing bond.
To get the yield on the existing bond we calculate the IRR of the flows as usual, and in this question the yield is approximately 4.55%.
Using the same yield, we then discount the flows for the new bond to arrive at the market value of the new bond of $93.00
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