SegalAir is a publicly traded company financed by the issuance of common equity, preferred equity, coupon bonds (duration 1 through 5 years), and European-style equity calls. These instruments are liquid and frequently traded.

In 2008 during the financial crisis, the company sought to raise capital to pay for their previously ordered new fleet of airplanes. They issued a security delivering a one-time payment of $100,000 five years in the future (2013). In lieu of receiving the one-time payment, the holder of the security could pay an additional $25,000 (in 2013) and receive 1,000 shares of stock. This holder of the security makes the decision in 2013.

Warren Buffett, your employer, has asked you to value this investment. Use the theories from this course to perform the valuation. Be clear as to the specific models, equations, and assumptions applied in your analysis.