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Suppose a platinum mining firm sells Mrs. Fiske 1 warrant. The firm has 2 shares outstanding. Mr. Gould owns one share and Ms. Rockefeller owns the other share. The assets of the firm are seven ounces of platinum, which were purchased at a price of $500 per ounce shortly before the warrant was sold. The warrant allows the holder to purchase 1 share in the firm for an exercise price of $1,800. All funds that enter the firm are used to purchase more platinum. (a) What was the price of the firm’s stock before the warrant was sold? (b) What is the lowest platinum price where Mrs. Fiske would find it in her interest to exercise her warrant? (c) suppose the price of platinum suddenly rises to $520 per ounce. If Mrs. Fiske exercises her warrant, how much will she profit from the exercise? (d) Suppose the price of platinum suddenly rises to $520 per ounce. Suppose that no warrant had been issued and that Mrs. Fiske instead exercised a call option to purchase 1 share for $1,800, how much will she profit from exercising the option?
You have two options of paying for your new dishwasher, you can either make a single payment of $400 today, or you can pay $70 for the next 6 months, with the first payment made today. what is the effective annual interest rate (EAIR) of the second o..
A project is expected to create operating cash flows of $33,000 a year for three years. The initial cost of the fixed assets is $68,000. These assets will be worthless at the end of the project. An additional $4,500 of net working capital will be req..
A stock has a beta of 1.25, the expected return on the market is 12 percent, and the risk-free rate is 2 percent. What must the expected return on this stock be?
Under which of the following discounting methods will the present value of an investment be the highest, assuming the same annual interest rate?
Complete a project that helps you apply theoretical knowledge of financial planning to practical applications. It is a proven fact that learning by doing is more effective than reading theory.
The U.S. Marine Corps issued a _____ when an official party consisting of high-ranking members of the Department of Defense visited a Marine Aircrew Training Systems Squadron to fly an Osprey simulator and personally evaluate the aircraft.
Ten years ago T-Bone Company purchased a drill for $250,000. It was being depreciated on a straight line basis to an estimated $25,000 salvage value over a 15 year period. The firm is considering selling the old drill and purchasing a new one that wo..
Klausenheimer has earnings before interest and taxes of $1,500,000. The book and the market value of debt is $1.7million. The unlevered cost of equity is 15.5 percent while the pre-tax cost of debt is 8.6 percent. The tax rate is 38 percent. What is ..
Principal, Inc. is acquiring Secondary Companies for $29,000 in cash. Principal has 2,500 shares of stock outstanding at a market price of $32 a share. Secondary has 1,600 shares of stock outstanding at a market price of $15 a share. Neither firm has..
Review the readings and media for this unit, including the Anthony's Orchard case study media and familiarise yourself with the Anthony's Orchard company and its current situation; this can be done by exploring each of the tabs across the top of th..
Lannister Manufacturing has a target debt−equity ratio of .45. Its cost of equity is 13 percent, and its cost of debt is 7 percent. If the tax rate is 34 percent, what is the company’s WACC?
Use Black Scholes to Value the put and call given the following criteria. The stock price six months from the expiration of an option is $13.50, the exercise price of the option is $13, the risk free interest rate is 10 percent per annum, and the vol..
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