Question

Lane Co has in issue 3% convertible loan notes which are redeemable in five years' time at
their nominal value of $100 per loan note. Alternatively, each loan note can be converted in
five years' time into 25 Lane Co ordinary shares.
The current share price of Lane Co is $3.60 per share and future share price growth is
expected to be 5% per year. The before-tax cost of debt of these loan notes is 10% and
corporation tax is 30%.
What is the current market value of a Lane Co convertible loan note?
A $82.71
B$73.47
C$67.26
D$94.20​

Answer 1

Answer:

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Explanation:

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