Share
Explore BrainMass

Convertible debt, project evaluation and bankruptcy

1. As a corporation what are the benefits and ramifications of using convertible debt to finance a publicly traded company? As an investor what are the benefits and ramifications of purchasing convertible debt in a publicly traded company? Are there any conflicts between the goals of the investor and the goals of the corporation?

2. Which two of the six methods used to evaluate projects, and to decide whether or not they should be accepted, do you prefer as a financial manager? Explain why you decided on these two and not the other four. List the perceived deficiencies of the four not selected.

3. What are the benefits and costs of placing a financially troubled company into a Chapter 11 Bankruptcy proceeding? Is this a legitimate and ethical vehicle for management to use for the benefit of the company's stakeholders?

Solution Preview

Answer:
1) As a corporation what are the benefits and ramifications of using convertible debt to finance a publicly traded company? As an investor what are the benefits and ramifications of purchasing convertible debt in a publicly traded company? Are there any conflicts between the goals of the investor and the goals of the corporation?

For Corporation: Benefits and ramifications of using convertible debt to finance a publicly traded company:
(i) Company share holders receive more operating income with high.
(ii) No voting rights to the convertible bondholders
(iii) Tax benefit of using debt in the convertible debt as the convertible debt interest expense is deductible.
For Investors: Benefits and ramifications of purchasing convertible debt in a publicly traded ...

Solution Summary

The solution discusses convertible debt, project evaluation and bankruptcy.

$2.19