An investor has P1,000 that she is interested in investing in National Inc. stock, which is currently selling for P50 per share. National Inc.'s warrants are selling for P12 per warrant. Each warrant entitles the holder to purchase three shares of National Inc.'s common stock for P47 per share. The warrant premium is

An investor has P1,000 that she is interested in investing in National Inc. stock, which is currently selling for P50 per share. National Inc.'s warrants are selling for P12 per warrant. Each warrant entitles the holder to purchase three shares of National Inc.'s common stock for P47 per share. The warrant premium is

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 13P

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An investor has P1,000 that she is interested in investing i Huan Inc. stock, which is currently selling for P50 per share.Huan Inc.'s warrants are selling for P12 per warrant. Each warrant entitles the holder to purchase three shares of Huan Inc.'s common stock for P47 per share. The warrant premium is Format: 1
On January 1, 2021, Kat Company has decided to raise additional capital by issuing P5,000,000 face value, 5 year bonds with interest rate of 12% payable annually on December 31. To help the sale of the bonds, share warrants are issued – one warrant for each P1,000 bond sold. The warrant entitles the holder to purchase 5 shares at P100 per share. The par value of the share is P50. It is reliably determined that the value of the warrants is P30 each time of issuance of the bonds. The bonds are sold for P5,100,000 with warrants but would have sold only at P4,657,000 without warrants with 14% effective yield. On December 31, 2021, 60% of the share warrants were exercised and the remaining warrants expire on April 1, 2022. 1. The total share premium to be credited to share premium – issuance on December 31, 2021 is: 2. The carrying amount of the bonds as of December 31, 2022 is:
The 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…
On January 1, 2021, Kat Company has decided to raise additional capital by issuing P5,000,000 face amount, 5 year bonds with interest rate of 12% payable annually on December 31. To help the sale of the bonds, share warrants are issued – one warrant for each P1,000 bond sold. The warrant entitles the holder to purchase 5 shares at P100 per share. The par value of the share is P50. It is reliably determined that the value of the warrants is P30 each time of issuance of the bonds. The bonds are sold for P5,100,000 with warrants but would have sold only at P4,657,000 without warrants with 14% effective yield. Required: Prepare journal entries for the current year in connection with the bonds including the exercise of the share warrants. The effective interest method of amortization is used.
On march 1 2023, Star corporation issue P500,000 of 10%, 7 year bonds with 1 taxable warrants attached to each P1,000 bond. each warrants provides for the right to purchase 20 shares of P15 ordinary shares for 20 each. The market value of the ordinary shares was P25 per share on july 1, 2023. the detachable warrants market price was P70 per warrant and the arket value of the bond without the warrants attached is P104. The bond was sold at 107. How much is the Premium or Discount on the issuance of bonds? P20,000 How much is the warrants outstanding? P15,000 Show full solution
In 2015, The Platinum Company issued $700,000 8% bonds with 700 nondetachable warrants for $765,000 cash. Each warrant entitled the holder to buy 100 shares of The Platinum Company’s $2 par common stock at $20 per share and required surrender of the attached $1,000 bond. On March 2, 2021, all The Platinum Company bondholders exercised their warrants for new shares and forfeited the bonds when shares were trading at $40 per share. On March 2, 2021, the unamortized premium on the bonds was $25,000. Prepare the necessary journal entry for the bond conversion on March 2, 2021 Assume that The Platinum Company uses the market method to record the stock issuances.
On January 1, 2020, Adam gave Lou, her son, a 36-month certificate of deposit she had purchased on December 31, 2018, for $8,638. The certificate had a maturity value of $10,000 and the yield to maturity was 5% with interest compounded annually. On December 2, 2020, Adam also gave 500 shares of stock in Disney to Lou. On November 30, 2020, Disney had declared a dividend of $1.00 per share payable to stockholders of record on December 5th. Required: Determine the amount of interest and dividends (if any) that lou must include in his gross income for 2020? Show computations to support your answer.
George bought 1,500 shares of stock LCC on March 7 at Php12. On June 3 of the same year, he sold these shares at Php14.50. If the broker's commission, transaction fees and taxes total 0.255% when buying, how much was George's total cash out in buying the 1,500 LCC shares?
As Treasurer of a company, you are about to issue a 10,000 bond maturing in three years with a 3.8% coupon that pays interest semi-annually:
A company issues 1,000 bonds, each with a face value of $1,000, for $1.1 million. Each bond has a detachable warrant that allows the holder to purchase common stock for $20 per share. The market value of the bonds without the warrants is $950,000. The fair market value of the warrants is $50,000.How much should the company record as the value of the warrants?
During 2018, QQ Corporation issued at 95, 1,000 of its 8%, P5,000 bonds due in ten years. One detachable stock purchase warrants entitling the holder to buy 20 shares of QQ’s ordinary shares was attached to each bond. Shortly after issuance, the bonds are selling at 10% ex-warrant, and each warrant was quoted at P60. What is the fair value of the bond? What amount, if any, of the proceeds from the bond issuance should be recorded as part of QQ’s shareholders’ equity?
On january 1, 2022, a company issued P2,000,000, 16% bonds at 102. Each P1,000 bonds has one detachable warrant that allows the holder to purchase ten shares of P50 par value stock at P70 per share. The bonds would have been sold at 99 without the warrants. In 2023, 800 warrants were exercised. How much is the credit to share premium when the warrants were exercised?