Sample Convertible Bond Analysis and Valuation

($ USD in Millions Except Per Share Amounts and Per Unit Data)

Convertible Bond Assumptions: Units: Units:

Current Date / Settlement Date: Date 2022-08-17 Conversion Price: $ as Stated $ 300.00
Company - Current Share Price: $ as Stated $ 200.00 Par Value: $ as Stated 1,000
Diluted Share Count Before Issuance: M Shares 400.000 Conversion Ratio: # 3.333
# Convertible Bonds: Millions 5.000
Dollar Amount: $M $ 5,000 Potentially Dilutive Shares: Millions 16.667
Fixed Coupon Rate: % 0.50%
Equivalent Rate on Non-Convertible Debt: % 4.00%
# Coupons per Year: # 2

Maturity in Whole Years: # Years 6

Maturity: Date 2028-12-31

Convertible Bond Accounting Treatment: Units: Units:

Issuance Fee %: % 1.00%

Single Liability (Most Common Under U.S. GAAP): Split Liability and Equity Components (IFRS):
Face Value of Convertible Bond: $M $ 5,000 Value as a TRADITIONAL BOND: $M $ 4,025
(-) Issuance Fees: $M (50) (-) Issuance Fees: $M (50)
Book Value of Liability: $M 4,950 Book Value of Liability: $M 3,975

Book Value of Equity Component: $M - Book Value of Equity Component: $M 975

(+) Annual Cash Interest Expense: $M 25 (+) Annual Cash Interest Expense: $M 25
(+) Amortization of Issuance Fees: $M 8 (+) Amortization of Issuance Fees: $M 8
(+) Amortization of Bond Discount: $M - (+) Amortization of Bond Discount: $M 163
Total Interest Expense: $M 33 Total Interest Expense: $M 196

Non-Cash Adjustments: $M $ 8 Non-Cash Adjustments: $M $ 171

Convertible Bond Valuation: Units: Units:

(+) PV of Bond Component: $M $ 4,025 Value per Call: $ as Stated $ 74.17

(+) PV of Conversion Option: $M 1,187 Value of Conv. Option per Bond: $ as Stated 247.23
Implied Value of Convertible Bond: $M 5,211 Value of Conv. Option Incl. Dilution: $ as Stated 237.34

Dilution: % 4.2% Value of Conv. Options on All Bonds: $M 1,187

Option Time To Expiration: # Years 6.5 Premium Over Straight Value: % 29.5%
Risk-Free Rate: % 2.86% Conversion Value: $ as Stated $ 666.67
Stock-Price Volatility (Std. Dev.): % 45.0% Market Conversion Price: $ as Stated 312.67
Variance: # 0.20
Dividend Yield of Stock: % - Market Conv. Premium per Share: $ as Stated 112.67
Market Conv. Premium Ratio: % 56.3%
d1 = # 0.3795
N(d1) = # 0.6478 Extra Income per Share: $ as Stated $ 1.50
Premium Payback Period: # Years 75.1
d2 = # (0.7649)
N(d2) = # 0.2222

Cost of Convertible Bond: Units: Units:

Option Delta: # 0.6478 Median Levered Beta: # 1.20

Option Elasticity: # 1.8197 Risk-Free Rate for Cost of Equity: % 2.81%
Option Beta: # 2.1862 Equity Risk Premium: % 5.50%

Cost of Conversion Option: % 14.84% Corporate Tax Rate: % 25.0%

Median Cost of Equity: % 9.42%

Market
Blended Cost of Convertible Bond: Value: Cost:
Debt Component: $ 4,025 3.00%
Equity Component: 1,187 14.84%
Convertible Bond - Market Value: 5,211 5.70%

Sensitivity Analyses - Convertible Bond Market Value:

Sensitivity Analysis for Implied Value of Convertible Bonds - Expected Stock Price Volatility vs. Stock Price:

Expected Stock Price Volatility:

521120.9% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 55.0% 60.0%
$ 80.00
135.00
190.00
Current Share Price: 245.00
300.00
355.00
410.00

Sensitivity Analysis for Implied Value of Convertible Bonds - Expected Stock Price Volatility vs. Strike Price of Call Option on Bond:

Expected Stock Price Volatility:

521120.9% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 55.0% 60.0%
$ 210.00
230.00
250.00
Conversion Price (Exercise Price on Call Option): 270.00
290.00
310.00
330.00

Sensitivity Analysis for Implied Value of Convertible Bonds - Expected Stock Price Volatility vs. Maturity of Convertible Bond:

Expected Stock Price Volatility:

521120.9% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 55.0% 60.0%
4
5
6
Maturity of Bonds (in Whole Years): 7
8
9
10