Mikkleson Mining Stock Is Selling for $40 Per Share and Has

question 29

Multiple Choice

Mikkleson Mining stock is selling for $40 per share and has an expected dividend in the coming year of $2.00, and has an expected constant growth rate of 5.00%.The company is considering issuing a 10-year convertible bond that would be priced at its $1,000 par value.The bonds would have an 8.00% annual coupon, and each bond could be converted into 20 shares of common stock.The required rate of return on an otherwise similar nonconvertible bond is 10.00%.What is the estimated floor price of the convertible at the end of Year 3?

• A) $794.01
• B) $835.81
• C) $879.80
• D) $926.10
• E) $972.41

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Definitions:

Planning/Control Cycle

A continuous process in organizations that involves planning for future activities, executing plans, monitoring results, and making adjustments as necessary.

Strategic Plans

Comprehensive documents outlining an organization's goals and the strategies to achieve them over a specific period.

Top Management

The highest level of management in an organization, including positions like CEO, CFO, and other senior executives responsible for strategic decision-making.

Mission Statements

Concise declarations made by organizations that summarize their values, aims, and purpose, guiding internal decision-making and informing stakeholders.