THE SHOCKING DEMISE OF MR. THORNDIKE Minicase solution, Chapter 24 Principles of Corporate Finance, 12th Edition R. A. Brealey, S. C. Myers and F. Allen After the corpse was removed, police inspectors came to dust the bedroom for fingerprints. Morse knew they would find nothing. He walked down the marble staircase of Rupert Thorndike’s mansion and into the paneled library. He sat at a table in front of the fireplace, scarcely noticing the painting over it, Monet’s portrait of the legendary John D. Thorndike at Giverny. He turned on his laptop computer. Thorndike Oil had three classes of securities outstanding: $250 million of debentures (face value), 30 million shares, and an issue of subordinated convertible notes. Morse had to calculate the change in the value of each security now that Thorndike was gone, and given the now near-certain acquisition of Thorndike Oil by T. Spoone Dickens. Table 1 reports Morse’s results. The notes summarize his reasoning. With Table 1 in hand, it was easy to calculate the increases in value due to the murder and resulting acquisition. Debt increased by 39.5% of face value. Common stock increased by $1.00 per share, and each convertible note increased from 103.95% to 110% of face value (from $1039.50 to $1100 per bond). Morse summed the gains to Doris, John and Patsy (see Table 2). Then he reached for his cell phone and dialed Chief Inspector Spillane. Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Thorndike Oil Table 1 Values of Thorndike Oil Securities Before and After the Murder Debt Before $151.25 million, 60.5% of face value Equity $270 million, $9 per share Convertible notes Notes 1. Debt, before: PV at 12% of the 5% coupon for 10 years, plus repayment of face value (100%) at year 10, is 60.5% of the $250 million face value, or $151.25 million. Debt, after: essentially risk-free. The debt will be repaid in short order and should trade very close to face value. The gain in market value is 1 - .605 = .395, or 39.5% of face value. 2. Shares: Share price increases from $9.00 to $10.00. 3. Convertible notes: Conversion value before is 110 shares at $9 per share = $990 per $1,000 note. The bonds were trading at 5% over conversion value, or 1.05×990 = $1,039.50. Note holders will convert prior to the takeover, receiving 110×10 = $1,100. (If they don’t convert, they get only $1,000.) In other words, the notes increase by 110 – 103.95 = 6.05% of face value. 103.95% of face value After $250 million 100% of face value $300 million, $10 per share 110% of face value Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 本文来源：https://www.wddqw.com/doc/28f44e406ddb6f1aff00bed5b9f3f90f77c64d49.html