Introduction to Corporate Finance

Ross et al.: Fundamentals
of Corporate Finance, Sixth
Edition, Alternate Edition

VI. Cost of Capital and

Long−Term Financial

Policy

16. Raising Capital © The McGraw−Hill^573
    Companies, 2002

545

TABLE 16.6

Convertible Bonds

Straight Bonds

Investment Grade

Noninvestment Grade

Investment Grade

Noninvestment Grade

Number

Total Number

Total

Number

Total

Number

Total

Proceeds

of

Gross

Direct

of

Gross

Direct

of

Gross

Direct

of

Gross

Direct

($ in millions)

Issues

Spread

Cost

Issues

Spread

Cost

Issues Spread

Cost

Issues

Spread

Cost

2– 9.99

0

—

—

0

—

—

14

.58%

2.19%

0

—

—

10– 19.99

0

—

—

1

4.00%

5.67%

56

.50

1.19

2

5.13%

7.41%

20– 39.99

1

1.75%

2.75%

9

3.29

4.92

64

.86

1.48

9

3.11

4.42

40– 59.99

3

1.92

2.43

19

3.37

4.58

78

.47

.94

9

2.48

3.35

60– 79.99

4

1.31

1.76

41

2.76

3.37

49

.61

.98

43

3.07

3.84

80– 99.99

2

1.07

1.34

10

2.83

3.48

65

.66

.94

47

2.78

3.75

100–199.99

20

2.03

2.33

37

2.51

3.00

181

.57

.81

222

2.75

3.44

200–499.99

17

1.71

1.87

10

2.46

2.70

60

.50

.93

105

2.56

2.96

500 and up

3

2.00

2.09

0

—

—

11

.39

.57

9

2.60

2.90

Total

50

1.81%

2.09%

127

2.81%

3.53%

578

.58%

.94%

446

2.75%

3.42%

Source: Inmoo Lee, Scott Lochhead, Jay Ritter, and Quanshui Zhao, “The Costs of Raising Capital,”

Journal of Financial Research

19 (Spring 1996).

Average Gross Spreads and Total Direct Costs for Domestic Debt Issues: 1990–94