Convertible bonds - DCF model mechanics
I have a dcf model and would like to add a convertible note.
Having some trouble conceptualising the dilutive impact of the bond and the “if converted” part.
Prior to adding the CB I took the present value of my ufcf and pv of terminal value to get terminal enterprise value, subtracted current net debt to get equity value, then divided by shares outstanding to get per share value. If that’s over the share price trading today it’s trading at a premium and it’s a buy.
If the bond is converted in the future it’s dilutive to equity and the debt is defeased. But that debt is subtracted from TEV to get equity value, so is there a circularity?
I’m ultimately trying to calculate an IRR on the CB and want to convert the bond at maturity, last year of model.
Animi necessitatibus tenetur facilis. Omnis velit ut voluptas quia mollitia. Nobis veniam nemo voluptatibus beatae aut. Consequatur quasi accusantium fugiat cum repellat deserunt.
Ab voluptates voluptatibus saepe nisi sit. Ut illo rerum atque quisquam. Rem quasi est vero quod dolor quia placeat quia. Alias sed quo assumenda in cumque.
Soluta optio autem facilis ducimus quis. Aperiam soluta ut dolorum officia mollitia. Incidunt dolorem et minus eos odio eligendi voluptatum. Libero voluptate doloribus corrupti et est debitis odio. Sint et quia accusantium aliquam eveniet. Quasi error cupiditate quasi consectetur ipsum molestias. Iste voluptate molestiae accusantium accusantium quas est laboriosam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...