chapter 14 Flashcards
1
Q
if each shares of preferred stock has a market value of $400, what is the min price that a share of the CCC venture’s common stock would selling for?
A
the price of common stock = price of preferred / convertible ratio
2
Q
price of preferred stock
A
convertible ratio x common stock
3
Q
implied conversion term
A
price preferred stock / price common stock
4
Q
enterprise valuation cash flow
A
EBIT x (1-enterprise tax rate) + depreciation & amortization expenses - ΔNWC - capital expenditure
5
Q
NWC
A
A - L
6
Q
ΔNWC
A
current year - previous year
7
Q
conversion price
A
(O x Pold) + (O x Pnew) / O+N
O = outstanding shares
N = new issued shares
8
Q
market price
A
(O x Pmarket) + (O x Pnew) / O+N
9
Q
conversion ratio
A
par value / conversion price
