1) $1000 par value convertible bond has the conversion price of: $50. It is at present selling for: $1,120 in spite of the fact that coupon rate of bond and market rate are equivalent. Common stock attained upon conversion is selling for: $54 per share. Determine the convertible bond's conversion premium
2) Martin Industries, Inc., has experienced a higher than expected demand for its fresh product line. Company plans to enlarge its operation by: 25% by spending: $5,000,000 for an additional building.
The company would like to uphold its: 40% debt to whole asset ratio in its capital structure and its dividend payout ratio of: 50% of net income. Net income was: $2,500,000 during last year
Questions:
1) Determine the retained earnings for last year?
2) Compute the debt which will be required for the new project?
3) How much external equity should Martin utilize at the commencement of this year in order to finance new expansion?
4) If Martin come to a decision to keep all earnings for upcoming year, how much external equity will be needed?