The Vermillion Inc. wants to raise its working capital. The Company decides to issue 6,000 shares of Php30 par preference shares with detachable warrants. The package of the shares and warrants sell for Php120. The warrants enable the holder to purchase 6,000 shares of Php10 par ordinary shares at Php40 per share immediately. Immediately following the issuance of the shares, the share warrants are selling at Php10 per share. The market value of the preference share without the warrants is Php90.

The Vermillion Inc. wants to raise its working capital. The Company decides to issue 6,000 shares of Php30 par preference shares with detachable warrants. The package of the shares and warrants sell for Php120. The warrants enable the holder to purchase 6,000 shares of Php10 par ordinary shares at Php40 per share immediately. Immediately following the issuance of the shares, the share warrants are selling at Php10 per share. The market value of the preference share without the warrants is Php90.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 8P

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