General Studies · Convertible Loan Notes
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?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1$94.20
- 2$67.26
- 3$73.47
- 4$82.71✓
Correct answer
$82.71
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