Loose Leaf for Corporate Finance Format: Loose-leaf
12th Edition
ISBN: 9781260139716
Author: Ross
Publisher: Mcgraw Hill Publishers
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Concept explainers
Question
Chapter 24, Problem 1CQ
Summary Introduction
To explain: The difference between a warrant and a traded call option.
Warrant:
Warrant is given to the security holder of those who purchase the shares. It is not the obligation of the shareholder but it is a right of the shareholder to purchase the share at a fixed price.
Option:
Option is the contract between two parties one is the buyer and the other is the seller. It gives the option to the buyer to purchase the share at a certain price at a fixed time.
Expert Solution & Answer
Answer to Problem 1CQ
- There is a little difference between the warrant and the call option.
- A company issues warrant and when it is implemented it increases the number of shares.
- Option is the contract between two parties’ the investor and the company which does not affect the number of shares.
Explanation of Solution
- Whenever the company issues warrant it increases the number of share, which is good for the company’s
goodwill . - Call option does not have an effect on the number of shares of a company.
Conclusion
Hence, it can be said that the difference between both of these is only the number of shares that gets affected.
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Chapter 24 Solutions
Loose Leaf for Corporate Finance Format: Loose-leaf
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 - 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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