What coupon rate should be set on the bonds-with-warrants

Reference no: EM13274916

Reynolds Industries is planning to issue bonds with warrants. The bonds will have a 30-year maturity and annual interest payments. Each bond will come with 20 warrants that give the holder the right to purchase one share of stock per warrant. The investment bankers estimate that each warrant will have a value of $10.00. A similar straight-debt issue would require a 10% coupon. What coupon rate should be set on the bonds-with-warrants so that the package would sell for $1,000?

Reference no: EM13274916

Questions Cloud

Lead to a bigger firm and a greater market concentration. : A merger will lead to a bigger firm and a greater market concentration.

What is the value of the straight-debt portion of the bonds : There are 30 warrants attached to each bond, which have a par value of $1,000. What is the value of the straight-debt portion of the bonds?

Explain heat generated by a car engine as it burns gasoline : Choose all of the processes from below which describe changes which are independent of the path by which the change occurs. the elevation increase experienced by a traveller travelling from Grand Isle, LA to Denver, Colorado

Design common drain amplifier that can couple signal source : A signal source produces a 4 volt peak-to-peak sinusoid and has a source resistance of 100 ohms. We wish to drive a grounded 10 ohm load to at least 2 volts peak-to-peak with this source. The load cannot tolerate DC. Your amplifier should not burn..

What coupon rate should be set on the bonds-with-warrants : A similar straight-debt issue would require a 10% coupon. What coupon rate should be set on the bonds-with-warrants so that the package would sell for $1,000?

How long did it take for the sound to travel to rodrigues : The huge volcanic eruption on the island of Krakatoa, Indonesia, in 1883 was heard on Rodrigues Island, How long did it take (in seconds) for the sound to travel to Rodrigues

What minimum yearly cash inflow will be necessary : what minimum yearly cash inflow will be necessary for the company to go forward with this project? b. How would the minimum yearly cash inflow change if the company required a 10% return on its investment?

Pentose sugars in living organisms : Explain the function of triose and pentose sugars in living organisms

What is the difference between a 401-k and an ira : What is the difference between a 401-K and an IRA? Should I have both? Can I have both? How does a 401-K fit into retirement planning and how does an IRA fit into retirement planning?

User Account

All Pages