CORPORATE FINANCE (LL)-W/ACCESS
11th Edition
ISBN: 9781259976360
Author: Ross
Publisher: MCG
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Chapter 24, Problem 15QP
Warrant Value Superior Clamps, Inc., has a capital structure consisting of 7 million shares of common stock and 900,000 warrants. Each warrant gives its owner the right to purchase one share of newly issued common stock for an exercise price of $25.
The warrants are European and will expire one year from today. The market value of the company’s assets is $165 million, and the annual variance of the returns on the firm’s assets is .20. Treasury bills that mature in one year yield a continuously
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Superior Clamps, Inc., has a capital structure consisting of 7 million shares common stock and 900,000 warrants. Each warrant gives its owner the right to purchase one share of newly issued common stock for an exercise price of $25. The warrants are European and will expire one year from today. The market value of the company's assets is $165 million, and the annual variance of the returns on the firm's assets is .20. Treasury bills that mature in one year yield a continously compounded interest rate of 7 percent. The company does not pay a dividend. Use the Black Scholes model to determine the value of a single warrant.
Blue Co. has a capital structure that consists of 25% equity and 75% liabilities. The company expects to report P3,000,000 in net income this year, and 50% of the it will be paid out as dividends to the shareholders.
Determine how large must the firm’s capital budget be this year without resorting to issue any new common stock.
a. 6,000,000
b. 2,000,000
c. 8,000,000
d. 240,000
Matchmaker Cards (MC) has $30 million in assets and EBIT equal to $3.5 million. If MC's debt ratio (DfTA) is 60 percent, the interest it pays on its debt is 11 percent and there will be 400,000 shares of stock outstanding, whereas if the debt ratio is 30 percent, interest is 7 percent and outstanding shares will equal 600,000.MC's marginaltax rate is 40 percent. Calculate MC's EPS and ROE for each capital structure (ROE = Net income/Equity). Which capital structure is better?
Chapter 24 Solutions
CORPORATE FINANCE (LL)-W/ACCESS
Ch. 24 - Prob. 1CQCh. 24 - Prob. 2CQCh. 24 - Convertible Bonds and Stock Volatility Suppose you...Ch. 24 - Convertible Bond Value What happens to the price...Ch. 24 - Prob. 5CQCh. 24 - Warrants and Convertibles What is wrong with the...Ch. 24 - Warrants and Convertibles Why do firms issue...Ch. 24 - Convertible Bonds Why will convertible bonds not...Ch. 24 - Convertible Bonds When should a firm force...Ch. 24 - Conversion Price A convertible bond with a par...
Ch. 24 - Conversion Ratio A convertible bond with a par...Ch. 24 - Conversion Premium Eckely, Inc., recently issued...Ch. 24 - Convertible Bonds Hannon Home Products, Inc.,...Ch. 24 - Prob. 5QPCh. 24 - Convertible Bond Value An analyst has recently...Ch. 24 - Convertible Bond Value Sportime Fitness Center,...Ch. 24 - Convertible Bonds You own a callable, convertible...Ch. 24 - Prob. 9QPCh. 24 - Convertible Bonds Vital Silence Corp. bas just...Ch. 24 - Convertible Bonds Rob Stevens is the chief...Ch. 24 - Prob. 12QPCh. 24 - Prob. 13QPCh. 24 - Prob. 14QPCh. 24 - Warrant Value Superior Clamps, Inc., has a capital...Ch. 24 - Prob. 16QPCh. 24 - SS AIR'S CONVERTIBLE BOND Chris Guthrie was...Ch. 24 - What is the floor value of the SS Air convertible...Ch. 24 - What is the conversion ratio of the bond?Ch. 24 - What is the conversion premium of the bond?Ch. 24 - What is the value of the option?Ch. 24 - Is there anything wrong with Todds argument that...Ch. 24 - Is there anything wrong with Marks argument that a...Ch. 24 - Prob. 8MCCh. 24 - During the debate, a question comes up concerning...
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