Calculate the exercise value of a warrant

Reference no: EM133291082

Question: Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $25.

Calculate the exercise value of a warrant at each of the following common stock prices: (1) $20, (2) $25, (3) $30, (4) $100. (Hint: A warrant's exercise value is the difference between the stock price and the purchase price specified by the warrant if the warrant were to be exercised.) If your answer is zero, enter "0". Round your answers to the nearest dollar.

(1)	$20	$
(2)	$25	$
(3)	$30	$
(4)	$100	$

Assume the firm's stock now sells for $20 per share. The company wants to sell some 20-year, $1,000 par value bonds with interest paid annually. Each bond will have attached 75 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm's straight bonds yield 11%. Assume that each warrant will have a market value of $2.75 when the stock sells at $20. What coupon interest rate must the company set on the bonds with warrants if they are to clear the market? (Hint: The convertible bond should have an initial price of $1,000.) Do not round intermediate calculations. Round your answer to two decimal places.

What dollar coupon must the company set on the bonds with warrants if they are to clear the market? (Hint: The convertible bond should have an initial price of $1,000.) Do not round intermediate calculations. Round your answer to the nearest dollar.

Reference no: EM133291082

Questions Cloud

What is the net present value of project : FIN 3200 Utah State University The equipment will be salvaged at the end of the project creating an aftertax cash flow of $45,400. What is the net present

How many brahman cattle his property could carry : Fred who is negotiating the sale on behalf of Hunter Cattle in their discussions asks Tom how many Brahman cattle his property could carry.

What is the cost of preferred stock : If the cost debt is 9% pa before tax and the tax rate is 40%. The CEO has calculated the WACC to be 9.96%. What is the cost of Equity

What are the bonds yield to call : FINANCE 6010 University of Massachusetts, Lowell The bonds currently have a yield to maturity of 10 percent. The bonds are callable in 8 years and have a call

Calculate the exercise value of a warrant : Calculate the exercise value of a warrant at each of the following common stock prices: (1) $20, (2) $25, (3) $30, (4) $100. (Hint: A warrant's exercise value

What is the defendant going to try to argue : We know what our client's best argument is: The Defendant ran the red light. But what is the Defendant going to try to argue?

Estimate the current share price today of bower : FINA 2360 Saint Mary's University If stocks with similar risk to the equity of Bower currently earn a return of 12%, estimate the current share price (today)

Discuss the current direction of that policy in australia : The Reserve Bank is responsible for the implementation of monetary policy. Define monetary policy and discuss the current direction of that policy in Australia

What is the importance of financial management : What are the legal forms that exist for a business organization? State the advantages and disadvantages and what is the importance of financial management

User Account

All Pages