Permit the holders to purchase one share of stock

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Reference no: EM13768133

Maese Industries had warrants outstanding that permit the holders to purchase one share of stock per warrant at a price of $25. We are to assume the firm’s stock now sells for $20 per share. The company wants to sell some 20-year, $1000 par value bonds with interest paid annually. Each bond will have attached 50 warrants, eac exercisable into one share of stock at an exercise price of $25. The firm’s straight bond yield 12%. Assume that each warrant will have a market value of $3 when the stock sells at $20. What coupon interest rate and dollar coupon must the company set on bonds with warrants if they are to clear the market? The convertible bond should have an initial price of $1000

Reference no: EM13768133

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Permit the holders to purchase one share of stock : Maese Industries had warrants outstanding that permit the holders to purchase one share of stock per warrant at a price of $25. We are to assume the firm’s stock now sells for $20 per share. The company wants to sell some 20-year, $1000 par value bon..

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