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Which of the following statements concerning warrants is correct? a. Warrants are long-term put options that have value because holders can sell the firm's common stock at the exercise price regardless of how low the market price drops. b. Warrants are long-term call options that have value because holders can buy the firm's common stock at the exercise price regardless of how high the stock's price has risen. c. A firm's investors would generally prefer to see it issue bonds with warrants than straight bonds because the warrants dilute the value of new shareholders, and that value is transferred to existing shareholders. d. A drawback to using warrants is that if the firm is very successful, investors will be less likely to exercise the warrants, and this will deprive the firm of receiving any new capital. e. Bonds with warrants and convertible bonds both have option features that their holders can exercise if the underlying stock's price increases. However, if the option is exercised, the issuing company's debt declines if warrants were used but remains the same if it used convertibles.
Bank regulators require adequate capital levels in banks because:
Your small remodeling business has two work vehicles. One is a small passenger car used for job-site visits and for other general business purposes. The other is a heavy truck used to haul equipment. How many miles would you have to drive the car bef..
Which of the following comes closest to the net present value (NPV) of a project that produces an inflow today of $108 but requires the payment of a cash flow of $200 at the end of year 3 if the required rate of return is 10%? Bond coupon payments an..
You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment?
An investor currently holds the following portfolio of 4 stocks, each having equal weight: What is the portfolio’s expected return? What is the portfolio’s beta risk? Is it more or less risky than the market?
Current and projected free cash flows for Radell Global Operations are shown below. Actual 2013 2014 Projected 2015 2016 Free cash flow $619.52 $680.20 $720.25 $763.47 (millions of dollars) Growth is expected to be constant after 2015, and the weight..
The price of a stock prior to a repurchase id 50.0 if the number of outstanding shares prior to a repurchase is 100,000 shares, how many shares were repurchased using $200000 cash?
Briefly explain how a company can achieve lower production costs and increase productivity by improving the quality of its products or services.
Several years ago the Jakob Company sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 7.00% annual coupon that is paid semiannually. The bond currently sells for $875, and the company’s tax rate is 40%. What is the com..
When an investment banking firm "underwrites" an issue of securities, the firm is performing which of the following? agreeing to market the securities to investors for a fee giving legal advice to the firm that is issuing the securities offering to p..
Some fast food restaurants have lease agreements where their rental payment is a nominal amount plus a percentage of sales, rather than a fixed monthly amount. Discuss the effect of these lease agreements on the leverage and risk of the company.
Describe total risk, diversifiable risk, and non-diverifiable risk. Which risk is most significant to the financial manager, why? Explain the security market line, SML. What is measured on the X and Y axis? What is the beta coefficient and its signif..
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