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id="mathjax_msie_frame">>Atlas Anglers Inc. is considering issuing a 15-year convertible bond that will be priced at its $1,000 par value. The bonds have a 6.5% annual coupon rate, and each bond can be converted into 20 shares of common stock. The stock currently sells at $30 a share, has an expected dividend in the coming year of $3, and has an expected constant growth rate of 5.5%. What is the estimated floor price of the convertible at the end of Year 3 if the required rate of return on a similar straight-debt issue is 9.5%? class="problemtypes"> a. $960.84class="mclabel">class="hand" for="bhffm13t.27.051_choice_1">name="choice.468948395" id="bhffm13t.27.051_choice_1" type="radio" value="1"> border="0">width="100%">align="left" valign="top">width="100%" class="choicetable" border="0" cellspacing="2" cellpadding="0">name="go.468948395" type="hidden" value="1">name="buttonclick" id="buttonclick" type="hidden" value="0">id="submitform_468948395" name="submitform_468948395" method="post" action="">id="rejoinderplaceholder_468948395_"> class="problemtypes"> class="mclabel">class="hand" for="bhffm13t.27.051_choice_1">name="choice.468948395" id="bhffm13t.27.051_choice_1" type="radio" value="1">id="rejoinderplaceholder_468948395_1"> b. $871.51 class="mclabel">class="hand" for="bhffm13t.27.051_choice_2">name="choice.468948395" id="bhffm13t.27.051_choice_2" type="radio" value="2"> border="0">width="100%">align="left" valign="top">style="float: left;" border="0">width="100%">align="left" valign="top">width="100%" class="choicetable" border="0" cellspacing="2" cellpadding="0">name="go.468948395" type="hidden" value="1">name="buttonclick" id="buttonclick" type="hidden" value="0">id="submitform_468948395" name="submitform_468948395" method="post" action="">id="rejoinderplaceholder_468948395_"> class="problemtypes"> class="mclabel">class="hand" for="bhffm13t.27.051_choice_2">name="choice.468948395" id="bhffm13t.27.051_choice_2" type="radio" value="2">id="rejoinderplaceholder_468948395_2"> c. $915.08 class="mclabel">class="hand" for="bhffm13t.27.051_choice_3">name="choice.468948395" id="bhffm13t.27.051_choice_3" type="radio" value="3"> border="0"> border="0">width="100%">align="left" valign="top">style="float: left;" border="0">width="100%">align="left" valign="top">width="100%" class="choicetable" border="0" cellspacing="2" cellpadding="0">name="go.468948395" type="hidden" value="1">name="buttonclick" id="buttonclick" type="hidden" value="0">id="submitform_468948395" name="submitform_468948395" method="post" action="">id="rejoinderplaceholder_468948395_"> class="problemtypes"> class="mclabel">class="hand" for="bhffm13t.27.051_choice_3">name="choice.468948395" id="bhffm13t.27.051_choice_3" type="radio" value="3">id="rejoinderplaceholder_468948395_3"> d. $830.01 class="mclabel">class="hand" for="bhffm13t.27.051_choice_4">name="choice.468948395" id="bhffm13t.27.051_choice_4" type="radio" value="4"> border="0"> border="0"> border="0">width="100%">align="left" valign="top">style="float: left;" border="0">width="100%">align="left" valign="top">width="100%" class="choicetable" border="0" cellspacing="2" cellpadding="0">name="go.468948395" type="hidden" value="1">name="buttonclick" id="buttonclick" type="hidden" value="0">id="submitform_468948395" name="submitform_468948395" method="post" action="">id="rejoinderplaceholder_468948395_"> class="problemtypes"> class="mclabel">class="hand" for="bhffm13t.27.051_choice_4">name="choice.468948395" id="bhffm13t.27.051_choice_4" type="radio" value="4">id="rejoinderplaceholder_468948395_4"> e. $790.48 class="mclabel">class="hand" for="bhffm13t.27.051_choice_5">name="choice.468948395" id="bhffm13t.27.051_choice_5" type="radio" value="5"> border="0"> border="0"> border="0"> border="0">width="100%">align="left" valign="top">style="float: left;" border="0">width="100%">align="left" valign="top"> id="mathjax_msie_frame">>width="100%" class="choicetable" border="0" cellspacing="2" cellpadding="0">name="go.468948395" type="hidden" value="1">name="buttonclick" id="buttonclick" type="hidden" value="0">id="submitform_468948395" name="submitform_468948395" method="post" action="">id="rejoinderplaceholder_468948395_"> class="problemtypes"> id="mathjax_msie_frame">>Atlas Anglers Inc. is considering issuing a 15-year convertible bond that will be priced at its $1,000 par value. The bonds have a 6.5% annual coupon rate, and each bond can be converted into 20 shares of common stock. The stock currently sells at $30 a share, has an expected dividend in the coming year of $3, and has an expected constant growth rate of 5.5%. What is the estimated floor price of the convertible at the end of Year 3 if the required rate of return on a similar straight-debt issue is 9.5%? id="mathjax_msie_frame"> a. $960.84class="mclabel">class="hand" for="bhffm13t.27.051_choice_1">name="choice.468948395" id="bhffm13t.27.051_choice_1" type="radio" value="1"> border="0">width="100%">align="left" valign="top">width="100%" class="choicetable" border="0" cellspacing="2" cellpadding="0">name="go.468948395" type="hidden" value="1">name="buttonclick" id="buttonclick" type="hidden" value="0">id="submitform_468948395" name="submitform_468948395" method="post" action="">id="rejoinderplaceholder_468948395_"> class="mclabel">class="hand" for="bhffm13t.27.051_choice_1">name="choice.468948395" id="bhffm13t.27.051_choice_1" type="radio" value="1">id="rejoinderplaceholder_468948395_1"> b. $871.51 class="mclabel">class="hand" for="bhffm13t.27.051_choice_2">name="choice.468948395" id="bhffm13t.27.051_choice_2" type="radio" value="2"> border="0">width="100%">align="left" valign="top">style="float: left;" border="0">width="100%">align="left" valign="top">width="100%" class="choicetable" border="0" cellspacing="2" cellpadding="0">name="go.468948395" type="hidden" value="1">name="buttonclick" id="buttonclick" type="hidden" value="0">id="submitform_468948395" name="submitform_468948395" method="post" action="">id="rejoinderplaceholder_468948395_"> class="mclabel">class="hand" for="bhffm13t.27.051_choice_2">name="choice.468948395" id="bhffm13t.27.051_choice_2" type="radio" value="2">id="rejoinderplaceholder_468948395_2"> c. $915.08 class="mclabel">class="hand" for="bhffm13t.27.051_choice_3">name="choice.468948395" id="bhffm13t.27.051_choice_3" type="radio" value="3"> border="0"> border="0">width="100%">align="left" valign="top">style="float: left;" border="0">width="100%">align="left" valign="top">width="100%" class="choicetable" border="0" cellspacing="2" cellpadding="0">name="go.468948395" type="hidden" value="1">name="buttonclick" id="buttonclick" type="hidden" value="0">id="submitform_468948395" name="submitform_468948395" method="post" action="">id="rejoinderplaceholder_468948395_"> class="mclabel">class="hand" for="bhffm13t.27.051_choice_3">name="choice.468948395" id="bhffm13t.27.051_choice_3" type="radio" value="3">id="rejoinderplaceholder_468948395_3"> d. $830.01 class="mclabel">class="hand" for="bhffm13t.27.051_choice_4">name="choice.468948395" id="bhffm13t.27.051_choice_4" type="radio" value="4"> border="0"> border="0"> border="0">width="100%">align="left" valign="top">style="float: left;" border="0">width="100%">align="left" valign="top">width="100%" class="choicetable" border="0" cellspacing="2" cellpadding="0">name="go.468948395" type="hidden" value="1">name="buttonclick" id="buttonclick" type="hidden" value="0">id="submitform_468948395" name="submitform_468948395" method="post" action="">id="rejoinderplaceholder_468948395_"> class="mclabel">class="hand" for="bhffm13t.27.051_choice_4">name="choice.468948395" id="bhffm13t.27.051_choice_4" type="radio" value="4">id="rejoinderplaceholder_468948395_4"> e. $790.48 class="mclabel">class="hand" for="bhffm13t.27.051_choice_5">name="choice.468948395" id="bhffm13t.27.051_choice_5" type="radio" value="5"> border="0"> border="0"> border="0"> border="0">width="100%">align="left" valign="top">style="float: left;" border="0">width="100%">align="left" valign="top"> id="mathjax_msie_frame">>width="100%" class="choicetable" border="0" cellspacing="2" cellpadding="0">name="go.468948395" type="hidden" value="1">name="buttonclick" id="buttonclick" type="hidden" value="0">id="submitform_468948395" name="submitform_468948395" method="post" action="">id="rejoinderplaceholder_468948395_"> id="mathjax_msie_frame"> a. $960.84class="mclabel">class="hand" for="bhffm13t.27.051_choice_1">name="choice.468948395" id="bhffm13t.27.051_choice_1" type="radio" value="1">

Explanation / Answer

c. $915.08

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