UPENN: LOOSE LEAF CORP.FIN W/CONNECT
17th Edition
ISBN: 9781260361278
Author: Ross
Publisher: McGraw-Hill Publishing Co.
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Question
Chapter 24, Problem 5QP
Summary Introduction
To determine: Warrant value.
Warrant value:
The difference between value of the stock and exercise price is called the warrant value. Warrant is issued by the company which increases the number of the shares.
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Students have asked these similar questions
Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $28.
a. Calculate the exercise value of a warrant at each of the following common stock prices: (1) $20, (2) $25, (3) $30, (4) $100. (Hint: A warrant's exercise
value is the difference between the stock price and the purchase price specified by the warrant if the warrant were to be exercised.) If your answer is
zero, enter "0". Round your answers to the nearest dollar.
(1) $20 $
0
(2) $25 $
0
(3) $30 $
(4) $100 $
2
72
b. Assume the firm's stock now sells for $20 per share. The company wants to sell some 20-year, $1,000 par value bonds with interest paid annually. Each
bond will have attached 75 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm's straight bonds yield 11%. Assume that
each warrant will have a market value of $2.5 when the stock sells at $20. What coupon interest rate must the company set on the bonds with…
Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock
per warrant at a price of $21.
a.
Calculate the exercise value of a warrant at each of the following common stock prices: (1)
$20, (2) $25, (3) $30, (4) $100. (Hint: A warrant's exercise value is the difference
between the stock price and the purchase price specified by the warrant if the warrant
were to be exercised.) If your answer is zero, enter "0". Round your answers to the nearest
dollar.
(1) $20 $
(2) $25 $
(3) $30 $
(4) $100$
b. Assume the firm's stock now sells for $20 per share. The company wants to sell some 20-
year, $1,000 par value bonds with interest paid annually. Each bond will have attached 25
warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm's
straight bonds yield 12%. Assume that each warrant will have a market value of $3.25
when the stock sells at $20. What coupon interest rate must the company set on the bonds
with warrants if…
Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $29.
Calculate the exercise value of a warrant at each of the following common stock prices: (1) $20, (2) $25, (3) $30, (4) $100. (Hint: A warrant's exercise value is the difference between the stock price and the purchase price specified by the warrant if the warrant were to be exercised.) If your answer is zero, enter "0". Round your answers to the nearest dollar.
(1)
$20
$
(2)
$25
$
(3)
$30
$
(4)
$100
$
Chapter 24 Solutions
UPENN: LOOSE LEAF CORP.FIN W/CONNECT
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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- Maese Industries Inc. has warrants outstanding that permit the holders topurchase 1 share of stock per warrant at a price of $25.a. Calculate the exercise value of the firm’s warrants if the common sellsat each of the following prices: (1) $20, (2) $25, (3) $30, (4) $100. (Hint:A warrant’s exercise value is the difference between the stock price andthe purchase price specified by the warrant if the warrant were to beexercised.)arrow_forwardThe warrants of Integra Life Sciences allow the holder to buy a share of stock at $14.75 and are selling for $5.75. The stock price is currently $13.50. To what price must the stock go for the warrant purchaser to at least be assured of breaking even? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Breakeven pricearrow_forwardAc The Redford Investment Company bought 110 Cinema Corp. warrants one year ago and would like to exercise them today. The warrants were purchased at $30 each, and they expire when trading ends today (assume there is no speculative premium left). Cinema Corp. common stock is selling today for $58 per share. The exercise price is $34 and each warrant entitles the holder to purchase two shares of stock, each at the exercise price. a. If the warrants are exercised today, what would the Redford Investment Company's dollar profit or loss be? (Do not round intermediate calculations. Input your dollar answer as a positive value rounded to the nearest whole dollar.) b. What is the Redford Investment Company's percentage rate of return? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Rate of return % Prev 6 of 10 Next >arrow_forward
- An investor owns a bond selling for $5,000. This bond can be converted into 50 shares of stock that are currently selling for $82 per share. Should the investor convert his bond into shares? Explain why?arrow_forward13. An investor purchases bonds with a face value of $100,000. Payment for thebonds includes (a) a premium (b) accrued interest rate and (c) brokeragefees. How would each of these charges be recorded and what dispositionwould ultimately be made of each of these charges??arrow_forwardA company has a bond with a standing value of $980 and instantaneously changes to $990. What is the JE if the company buys out the bond early?arrow_forward
- Ex 2. On January 2, 2025, Volunteers Ventures Inc. issued $1 million 9% bonds due in 2045 at 105. With each $1,000 bond were 10 detachable warrants. Each warrant permitted the holder to buy one share of $10 common stock at $30 per share. After issuance, the warrants were listed at $10 on a stock exchange. What method should we use to allocate the price between the bond and the warrants? How much of the price should be allocated to the bond and how much should be allocate to the warrants? Make the necessary journal entry to record the transaction (remember you can make a joint entry or split-it up into two entries if that is easier)arrow_forwardAn investor purchased a bond 45 days ago for $985. He received $15 in interest and sold the bond for $980. What is the holding-period return on his investment? A. 1.92% B. 1.02% C. 0.50% D. 0.01%arrow_forwardassume that you purchased a $1,000 convertible corporate bond. Also assume the bond can be converted to 28.5 shares of the firm’s stock. What is the dollar value that the stock must reach before investors would consider converting to common stock?arrow_forward
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