CORPORATE FINANCE CUSTOM W/CONNECT >BI
11th Edition
ISBN: 9781307036633
Author: Ross
Publisher: MCG/CREATE
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Question
Chapter 24, Problem 9QP
a.
Summary Introduction
To determine: Upper and lower limit of price of 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 share.
b.
Summary Introduction
To determine: Upper and lower limit of price of warrant value.
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Students have asked these similar questions
Jacobs Company has warrants outstanding, which are selling at a $2.50 premium above intrinsic value. Each warrant allows its owner to purchase one share of common stock at $26. If the common stock currently sells for $30, what is the warrant price?
A. $6.50
B. $6.40
C. $6.75
D. $7.25
Potter Industries Inc. has warrants outstanding that permit its holders to purchase 1 share of stock per warrant at a price of $18. (Refer to Chapter 18 for parts a, b, and c.)
a. Calculate the exercise value of Potter’s warrants if the common stock sells at each of the following prices: $18, $21, $25, and $70.
b. At what approximate price do you think the warrants would sell under each condition indicated in part a? What premium is implied in your price? Your answer will be a guess, but your prices and premiums should bear reasonable relationships to each other.
c. How would each of the following factors affect your estimates of the warrants’ prices and premiums in part b?
The life of the warrant is lengthened.
The expected variability (sp) in the stock’s price decreases.
The expected growth rate in the stock’s EPS increases.
The company announces the following change in dividend policy: Whereas it formerly paid no dividends, henceforth it will pay out all earnings as dividends.
d.…
Acme stock price is currently $10 per share. Acme's warrants have a price of $7 per warrant. Each warrant enables the holder to purchase three shares of Acme's common stock for $8 per share. What is the speculative premium on the warrant?
and
Suppose that an investor buys a 100-share call option for $250. It has an exercise price of $60. The underlying price per share of the stock at expiration is $66. What then is the amount of profit or loss, ignoring brokerage fees?
Chapter 24 Solutions
CORPORATE FINANCE CUSTOM W/CONNECT >BI
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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