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A company issues the convertible bond with 10% interest rate, which gives the right to...

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Finance

A company issues the convertible bond with 10% interest rate, which gives the right to convert into common stocks after three years. The face value of the bond is $7.5 and exchange rate is 4. Thus, 4 common stocks are given in exchange for the bond of 7,5 at the time of exchange. The company forecasts the market value of the common stocks $1.7 after three years. Suppose that the tax rate is 25%, calculate the cost of convertible bonds

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