Page 30 - PowerPoint Presentation
P. 30
COST OF CAPITAL
Debt (kd)
Convertible debt:
Step 2: Decide which option the debenture holders would opt for
The convertible debenture has a higher value than the non redeemable
debenture – therefore assume debenture holders will convert.
If the company had the option of converting instead of the debenture
holder they would then obviously select the lowest value. i.e. continue
with existing debentures.
30
