Valdes Enterprises 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%.The stock currently sells for $40.00 a share,has an expected dividend in the coming year of $2.00,and has an expected constant growth rate of 5.00%.What is the estimated floor price of the convertible at the end of Year 3?

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The Answer of Valdes Enterprises 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%.The stock currently sells for $40.00 a share,has an expected dividend in the coming year of $2.00,and has an expected constant growth rate of 5.00%.What is the estimated floor price of the convertible at the end of Year 3?

Valdes Enterprises Is Considering Issuing a 10-Year Convertible Bond That