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Valuing warrants
Assume a firm has warrants outstanding that permit the holder to buy one new share of stock at $25 per share. The market price of the stock is now $34.
a. What is the intrinsic value of the warrant?
b. Why might the warrant sell for $2 on the market even if the stock price is $22?
Hanadi Industries is considering expanding its production capacity by purchasing a new machine. The new machine requires an initial outlay of $500 million. Once the machine is operating, the extra capacity is expected to generate $75 million per year..
Normal tea companies grow at a constant rate of 5%. However, Taya's Tea Company has tested a brand new tea that will lead to significant growth. The current dividend is $3.0, but over the next two years it will grow by 25%. What is the dividend yield..
Skim Milk and Part Whole Milk are identical firms except that Skim is more leveraged than Part Whole. The probability of a recession is equal to the probability of an expansion. If recession occurs, each Firm will have EBIT of $0.5 million next year...
Atlantic Company buys merchandise from their suppliers on credit. They must pay the total amount due within 50 days of purchase. However, if the pay their bill within 12 days the would be able to take a discount of 4% off of the total purchase price...
John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital’s lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Compu..
Discuss the limitations of ratio analysis. In a summary explain the limitations of ratio analysis to help me with a project. I need good details, with well explained limitations please.
Suppose in August of 2015 a high school senior is offered on of the following two tuition vouchers: A voucher that pays $2000 for the upcoming academic year (2015) A voucher that pays $3000 2 academic years in the future (2017) Assume that the studen..
Advantage First Corporation has sales of $4,964,060; income tax of $514,886; the selling, general and administrative expenses of $224,035; depreciation of $368,851; cost of goods sold of $2,900,500; and interest expense of $101,207. What is the amoun..
the green motorcar company is producing a new car. it is flex-fuel plug-in hybrid. a flexfuel vehicle has an engine
The price of a European put that expires in eight months and has a strike price of $50 is $3. The underlying stock price is $53, and a dividend of $1 is expected in three months and again in six months. Explain the arbitrage opportunity in the above ..
Which of the following statements related to financial risk are correct?
Piotr plans to make regular savings contributions of 8,400 dollars per year to his retirement account for 8 years. His first regular contribution to his retirement account is expected in 1 year. In addition, he also plans to make a one-time, special ..
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