On May 1, 2021, GREEN Company issued ₱2,000,000, 5-year, 10% bonds for ₱2,300,000. Each ₱1,000 bond has two detachable warrants eligible for the purchase of one share of GREEN's ₱100 par ordinary share for ₱120. Without the warrants, the bonds are selling at a prevailing 9% rate of interest. The PV factor of an annuity of 9% for 5 periods is 3.89; the PV factor of 9% on the 5th year is .65. How much is the value of the equity instrument or the detachable warrants?
On May 1, 2021, GREEN Company issued ₱2,000,000, 5-year, 10% bonds for ₱2,300,000. Each ₱1,000 bond has two detachable warrants eligible for the purchase of one share of GREEN's ₱100 par ordinary share for ₱120. Without the warrants, the bonds are selling at a prevailing 9% rate of interest. The PV factor of an annuity of 9% for 5 periods is 3.89; the PV factor of 9% on the 5th year is .65. How much is the value of the equity instrument or the detachable warrants?
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter10: Long-term Liabilities
Section: Chapter Questions
Problem 10.1AP
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On May 1, 2021, GREEN Company issued ₱2,000,000, 5-year, 10% bonds for ₱2,300,000. Each ₱1,000 bond has two detachable warrants eligible for the purchase of one share of GREEN's ₱100 par ordinary share for ₱120. Without the warrants, the bonds are selling at a prevailing 9% rate of interest. The PV factor of an annuity of 9% for 5 periods is 3.89; the PV factor of 9% on the 5th year is .65. How much is the value of the equity instrument or the detachable warrants?
a. ₱ 78,000
b. ₱ 300,000
c. ₱ 230,000
d. ₱ 222,000
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