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netineya
2 months ago
11

Rizzo Company has debentures ($1,000 par) outstanding that are convertible into the company's common stock at a price of $25. Th

e convertibles have a coupon interest rate of 8% and mature in 12 years. In addition, the convertible debenture is callable at 110% of the par value. Straight debt of equivalent risk is yielding 12%. The company's common stock is selling at $22 per share. The company has a marginal tax rate of 40%. Determine the conversion value of the issue
Business
1 answer:
Mariulka [3.8K]2 months ago
5 0

Answer:

A. $880

B. -$752.23

Explanation:

To find the conversion value of the issue, we start with this calculation

The initial step is to compute the Conversion ratio using the following formula

Conversion ratio = Par value of security/ Conversion price

Substituting, we find

Conversion ratio = $1,000/$25

Thus, Conversion ratio = 40

Next, we determine the Conversion value with this formula

Conversion value = Conversion ratio * Conversion price

Substituting gives

Conversion value = 40*$22 per share

Therefore, the conversion value of the issue equals $880

B. Now calculating the Straight bond value of the issue

Using a financial calculator for Present Value (PV)

PMT = 8%*1,000 = 80

N = 12 years

1/Y = 12%

FV = 1,000

Thus, PV = -$752.23

This means the Straight bond value of the issue is -$752.23

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Claremore Industries uses a weighted-average process-costing system. All materials are added at the beginning of the process; co
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Answer:

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For calculating the cost of the ending work in process

To begin, we will calculate the material cost per unit.

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Conversion cost per unit= $414000 / 46000

Conversion cost per unit= $9

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Manager receives a forecast for next year. demand is projected to be 600 units for the first half of the year and 900 units for
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A) For the first half of the year, the monthly demand averages to 560 / 6 = 93.33
Order size for the first six months can be calculated using: Sqrt(2 x A x O / C)
Where:
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C is the carrying cost per order
= Sqrt(2 x 93.33 x 55 / 2) = 71.65, rounded to 72
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= Sqrt(2 x A x O / C)
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Monthly TC (Q = 150)= (150/2) x 2 + (150/150) x 45= $195
 
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