Assingmentnewlink genetics nlnk has just issued 25-year, Ask an Expert

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Assingment:

Newlink Genetics (NLNK) has just issued 25-year callable convertible bonds with a coupon rate of 6% annually and a par value of $1,000. Coupon payments are made on a semi-annual basis and the bond has a conversion price of $95. The companies stock is selling for $31 per share. The owner of the bond will be forced to convert if the bonds conversion value is ever greater than or equal to $1,250. The required rate of return on an otherwise identical nonconvertible bond is 8%.

Requirement:

Question 1: What is the minimum value of the bond?

Question 2: If the stock were to grow by 15% forever, how long would it take the bonds conversion value to exceed $1,250?

Note: Please provide through step by step calculations.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91166872

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