A firm has 2,000 shares of stock and 200 warrants outstanding. The warrants are about to expire, and all of them will be exercised. The market value of the firm's assets is $14,000, and the firm has no debt. Each warrant gives the owner the right to buy 1 share at $5. What is the warrant's effective exercise price?
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A firm has 2,000 shares of stock and 200 warrants outstanding. The warrants are about to expire, and all of them will be exercised. The market value of the firm's assets is $14,000, and the firm has no debt. Each warrant gives the owner the right to buy 1 share at $5. What is the warrant's effective exercise price?
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- Lara’s Inc. is currently an unlevered firm with 450,000 shares of stock outstanding, with a market price of $15 a share. The company has earnings before interest and taxes of $314,000. Lara's met with his bankers, Warne Incorporated and agreed to borrow $825,000, at 5 percent. You are an ardent investor and you currently own 20,000 shares of Lara's stock. If you seek to unlevered your position; how many shares of Lara's stock will you continue to own, if you can loan out funds at 5 percent interest? Ignore taxes in your deliberations. Kindly show all workingsThe Gifford Investment Company bought 90 Cable Corporation warrants one year ago and would like to exercise them today. The warrants were purchased at $25 each, and they expire when trading ends today. (Assume there is no speculative premium left.) Cable Corporation common stock was selling for $49 per share when Gifford Investment Company bought the warrants. The exercise price is $41, and each warrant entitles the holder to purchase two shares of stock, each at the exercise price. What was the intrinsic value of a warrant at that time? What was the speculative premium per warrant when the warrants were purchased? The purchase price, as indicated earlier, was $25. What would Gifford’s total dollar profit or loss have been had it invested the $2,250 directly in Cable Corporation’s common stock one year ago at $49 per share? Cable Corporation common stock is selling today for $59 per share. What would the percentage rate of return be on this common stock investment? Compare this to…Hotel Cortez is an all-equity firm that has 10,000 shares of stock outstanding at a market price of $31 per share. The firm's management has decided to issue $60,000 worth of debt and use the funds to repurchase shares of the outstanding stock. The interest rate on the debt will be 9 percent. What is the break-even EBIT?
- Lancaster Corporation, an investment banking company, often has extra cash to invest. Suppose Lancaster buys500 shares of Knight Corporation stock at $40 per share, representing less than 5% of Knight’soutstanding stock. Lancaster expects to hold the Knight stock for one month and then sell it.The purchase occurs on December 15, 2018. On December 31, the market price of one share ofKnight stock is $47 per share.Requirements1. What type of investment is this for Lancaster? Give the reason for your answer.2. Record Lancaster’s purchase of the Knight stock on December 15 and the adjustment tomarket value on December 31.3. Show how Lancaster would report this investment on its balance sheet at December 31 andany gain or loss on its income statement for the year ended December 31, 2018DCF Enterprises Inc.'s capital structure consists of 18 million shares of common stock and 1 million warrants. Each warrant entitles the holder to acquire one share of common stock for $17 if exercised. The stock is currently trading at $26, and each warrant is worth $10. And what's the company's new value?What is the current price of the stock?Galt Industries has 50 million shares outstanding and a market capitalization of $1.25 billion. It also has $750 million in debt outstanding. Galt Industries has decided to delever the firm by issuing new equity and completely repaying all the outstanding debt. Assume perfect capital markets. Suppose you are a shareholder in Galt industries holding 100 shares, and you disagree with this decision to delever the firm. You can undo the effect of this decision by: borrowing $1500 and buying 60 shares of stock. selling 40 shares of stock and lending $1000. borrowing $1000 and buying 40 shares of stock. selling 32 shares of stock and lending $800.
- Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $25. a. 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.) b. 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 50 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm’s straight bonds 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 the bonds with warrants if they are to clear the market? (Hint: The convertible bond should have an initial price of $1,000.)BL Plastics is an all equity firm that has 27,000 shares of stock outstanding. The company has decided to borrow $46,080 to buy out the shares of a deceased stockholder who holds 600 shares. What is the total value of this firm if you ignore taxes?Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $29. 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 $
- Your company, Ohiobucks (OB), hires an investment bank to underwrite an issue of 10 million shares of OB stock on a best-effort basis. The investment bank sells 8 million shares and charges OB $0.225 per share sold. The price of each share is $10.50. How much will the investment bank earn after the issuance? A. $7.0 MM B. $7.5 MM C. $1.8 MM D. $1.0 MMDCF Enterprises Inc.'s capital structure consists of 18 million shares of common stock and 1 million warrants. Each warrant entitles the holder to acquire one share of common stock for $17 if exercised. The stock is currently trading at $26, and each warrant is worth $10. And what's the company's new value?What is the current price of the stock? AsapDCF Enterprises Inc.'s capital structure consists of 18 million shares of common stock and 1 million warrants. Each warrant entitles the holder to acquire one share of common stock for $17 if exercised. The stock is currently trading at $26, and each warrant is worth $10. What is the company's new value? What is the current price of the stock? Asap
