财务管理：理论与实践21show(编辑修改稿)

财务管理：理论与实践21show(编辑修改稿)内容摘要：

th warrants package is higher than the 12% cost of straight debt because part of the expected return is from capital gains, which are riskier than interest ine. The cost is lower than the cost of equity because part of the return is fixed by contract. (More...) 21 20 Copyright 169。 20xx Harcourt, Inc. All rights reserved. When the warrants are exercised, there is a wealth transfer from existing stockholders to exercising warrant holders. But, bondholders previously transferred wealth to existing stockholders, in the form of a low coupon rate, when the bond was issued. 21 21 Copyright 169。 20xx Harcourt, Inc. All rights reserved. At the time of exercise, either more or less wealth than expected may be transferred from the existing shareholders to the warrant holders, depending upon the stock price. At the time of issue, on a riskadjusted basis, the expected cost of a bondwithwarrants issue is the same as the cost of a straightdebt issue. 21 22 Copyright 169。 20xx Harcourt, Inc. All rights reserved. 20year, % annual coupon, callable convertible bond will sell at its $1,000 par value。 straight debt issue would require a 12% coupon. Call protection = 5 years and call price = $1,100. Call the bonds when conversion value $1,200, but the call must occur on the issue date anniversary. P0 = $20。 D0 = $。 g = 8%. Conversion ratio = CR = 40 shares. Assume the following convertible bond data: 21 23 Copyright 169。 20xx Harcourt, Inc. All rights reserved. What conversion price (Pc) is built into the bond? Like with warrants, the conversion price is typically set 20%30% above the stock price on the issue date. $1,000 40 Pc = = = $25. Par value Shares received 21 24 Copyright 169。 20xx Harcourt, Inc. All rights reserved. Examples of real convertible bonds issued by Inter panies Issuer CNET DoubleClick Mindspring NetBank PSINet Size of issue $1,250 mil 55 mil 173 mil 250 mil 180 mil 100 mil 400 mil 150 mil Cvt Price $ 165 Price at issue $122 16 84 134 60 32 55 52 21 25 Copyright 169。 20xx Harcourt, Inc. All rights reserved. What is (1) the convertible’s straight debt value and (2) the implied value of the convertibility feature? PV FV 20 12 105 1000 Solution: I/YR PMT N Straight debt value: 21 26 Copyright 169。 20xx Harcourt, Inc. All rights reserved. Because the convertibles will sell for $1,000, the implied value of the convertibility feature is $1,000 $ = $. The convertibility value corresponds to the warrant value in the previous example. Implied Convertibility Value 21 27 Copyright 169。 20xx Harcourt, Inc. All rights reserved. Conversion value = CVt = CR(P0)(1 + g)t. t = 0 CV0 = 40($20)()0 = $800. t = 10 CV10 = 40($20)()10 = $1,. What is the formula for the bond’s expected conversion value in any year? 21 28 Copyright 169。 20xx Harcourt, Inc. All rights reserved. The floor value is the higher of the straight debt value and the conversion value. Straight debt value0 = $. CV0 = $。