What is the implied value of each warrant

Assignment Help Finance Basics
Reference no: EM13303762

Charles River Company has just sold a bond issue with 40 warrants attached. The bonds have a 20-year maturity, an annual coupon rate of 12.0 percent, and they sold at their $1,000 par value. The current yield on similar straight bonds is 15.0 percent.

(a) What is the implied value of each warrant?
(b) Each warrant can be exchanged for one share at an exercise price of $25. Suppose, current stock price is $18 and is expected to appreciate at an annual rate of 6 percent a year. If investors exercise all warrants at the end of nine years, what will be the firm's cost of capital for this issue of bonds with warrants?

 

Reference no: EM13303762

Questions Cloud

What is relationship between interest rate and bond price : What is the relationship between the interest rate and bond price? After you purchase a bond, would you like to see the interest rate increases or decreases to earn the capital gains? Why?
What is the angle between adjacent polarizers : You use a sequence of ideal polarizing filters, each with its axis making the same angle with the axis of the previous filter, What is the angle between adjacent polarizers
What would its annual return be : What is Horatio Ltd's. maximum willingness to pay for this property using the net capitalization method.
Compute the persons mass : A playground carousel is free to rotate about its center on frictionless bearings, and air resistance is negligible. What is the person's mass
What is the implied value of each warrant : Charles River Company has just sold a bond issue with 40 warrants attached. The bonds have a 20-year maturity, an annual coupon rate of 12.0 percent, and they sold at their $1,000 par value. The current yield on similar straight bonds is 15.0 perc..
What is the velocity of the truck right after the collision : A 1 115.0 kg car traveling initially with a speed of 25.000 m/s in an easterly direction crashes into the back of a 8 200.0 kg truck moving in the same direction at 20.000 m/s. What is the velocity of the truck right after the collision
What is the convertible straight bond value : Did the company gain or lose by issuing bonds with conversion feature, as opposed to issuing straight bonds? What motivated the investors to buy bonds at a lower coupon rate of 9.75% when bonds of comparable risk were offering 12.50%? Explain.
Global economy : Based on what you know at the time you are answering this question, how would you describe the financial health of the U.S. economy?  Of the global economy?
What is the change in the electrons energy : An electron is in a certain energy state in a one-dimensional, infinite potential well from x = 0 to x = L = 125 pm. What is the change in the electron's energy

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the annualized cost of not taking a discount

Use a 360 day year for this problem. What is the annualized cost of not taking a discount on a $100,000 transaction if the the credit terms are 2/15 net 45?

  Computing pv of future requirements

Starting three months from now, you want to be able to withdraw $1,700 every quarter from your bank account to cover college expenses over the next four years.

  What is the default risk premium on the corporate bond

Assume that the liquidity premium on the corporate bond is 0.3%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.

  What is the present value of the technology

Subsequent annual cash flows will grow at 3.5 percent in perpetuity. What is the present value of the technology if the discount rate is 10 %.

  Most respected and recognized brands in world

What strategic paths can Starbucks pursue its objectives as becoming the most respected and recognized brands in the world?

  Open end mutual fund investing in us

Suppose you have decided to buy a diversified open-end mutual fund investing in U.S. common stocks. Because there are thousands of these funds available,

  What percent of markup on selling price does this represent

what selling price factor is equivalent to a gross profit of 40%

  Calculate and graph the net profit margin

For your stock companies HSBC Holding,PLC, calculate and graph the net profit margin, total asset turnover, and return on assets for each of the past three years.

  Make journal entries without explanations

Tobias Company has 40,000 shares of $10 par value common stock outstanding. Make journal entries without explanations for the following transactions.

  What is the firm dayss sales in inventory

Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days's sales in inventory?

  What is the nominal annual percentage cost

What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?

  Maximize profitability

Toxemia Salsa Corporation manufactures five flavors of salsa. Last year, Toxemia generated net operating income of $40,000. The following data was taken from last year's income statement segmented by flavor;

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd