The following points highlight the three main types of fundamental valuation of securities in a company. The types are:- 1. Valuation of Convertible Bonds/Debentures 2. Valuation of 'Rights' 3. Valuation of Bonds. Type # 1. Valuation of Convertible Bonds/Debentures: Convertibles enjoy the benefits of both debt (initially) and equity (later). The terms of conversion will decide the pricing of these [...]
Normally, any Company follows the accounting norms in valuation of all the assets and liabilities, as laid down by the Institute of Chartered Accountants. Subject to these guidelines, the accounting practices vary from company to company. When a company is due to pay interest or repay the principal, these become contingent liabilities, due at specified future dates. They are paid [...]
Whether it is a bond or debenture with an option of convertibility or compulsory conversion at the end of a period of time, the value of that bond or debenture is related firstly to the value of equity into which it can be converted and secondly to the value of residual non-convertible portion of the debenture instrument, which remains as [...]