Calculate the intrinsic value of warrant and market premium

Assignment Help Financial Management
Reference no: EM131048535

ABC Co. has warrants that allow the purchase of two shares of its common stock at $30 per share. The common stock price per share is $33 and the market value of the warrant is $8. Calculate the intrinsic (theoretical) value of the warrant and its market (speculative) premium

Reference no: EM131048535

Questions Cloud

Compute the effective annual rate of interest : Find the equated date at which two payments of $6000 due four months ago and $400 due today could be settled by a payment of $1100, if interest is 7.25%compounded semiannually. Compute the effective annual rate of interest A) For 6% compound annually..
Leather-cutting machine to replace an existing machine : Topsider Inc. is considering the purchase of a new leather-cutting machine to replace an existing machine that has a book value of $3000 and can be sold for $1500. The old machine is being depreciated on a straight-line basis, and its estimated salva..
Pension fund you are managing is expecting inflow of fund : Frontier Bank offers one-year loans with a stated rate of 7.5 percent, charges a 1/4 percent loan origination fee, imposes a 5 percent compensating balance requirement, and has a 10 percent reserve requirement. Suppose that the pension fund you are m..
Calculate the intrinsic value of warrant and market premium : ABC Co. has warrants that allow the purchase of two shares of its common stock at $30 per share. The common stock price per share is $33 and the market value of the warrant is $8. Calculate the intrinsic (theoretical) value of the warrant and its mar..
Growth rate indefinitely-what is price of the stock today : Thirsty Cactus Corp. just paid a dividend of $1.50 per share. The dividends are expected to grow at 35 percent for the next 6 years and then level off to a 6 percent growth rate indefinitely. Required: If the required return is 13 percent, what is th..
Certainty about the performance of stock for this year : One year ago, Barkley s stock sold for $20 a share. During last year, Barkley's paid $1.40 per share in dividends and saw its stock price increase by five percent for the year. Today, the firm announced that it will pay $1.43 per share in dividends t..
Total cash operating expenses-shares outstanding : A firm has the following accounts and financial data for 2015: Sales Revenue of $3,500, Cost of Goods Sold of $1,750, Accounts Receivable of $650, Dividends of $22, Depreciation Expense of $180, Interest Expense of $156, Tax Rate of 40%, Total Cash O..
About the market and book ratio : ABC Co. generated $15.1 billion in sales last fiscal year. At FYE, ABC’s balance sheet showed that the company has $12 billion in total assets, of which $7.3 are current assets. Its balance sheet further shows $2.5 billion in current liabilities, $3 ..

Reviews

Write a Review

Financial Management Questions & Answers

  Contractual claim against the builder

The builder laughs and says, "I don't really need them, you should just take them back and dump them in the ditch". Do you think the teenagers have a contractual claim against the builder that they can recover on in court? How should they proceed?

  1 a if there is 10 inflation in mexico 15 inflation in

1. a if there is 10 inflation in mexico 15 inflation in turkey and the turkish lira weakens by 20 relative to the

  How business could be adversely affected by political risk

You only need to know this background so that you can answer the related questions that are asked about your business. Answer each question as if you were serving on the board of your business or as a manager of the business.

  Describe how you would hedge against interest rate risk

You wish to sell your $50 million 10-year bond in 6 months from today. Describe how you would hedge against interest rate risk using US treasury bond futures. Illustrate your answer if rates go up and when they go down.

  What is market value for government bonds

Bonds pay semiannual interest of $ 75. They mature in 10 years and have a par value of $1000. The market rate of interest is 7 %. What is the market value for the Government bonds? Lipbalm issued 10 - year bonds 2 years ago at a coupon rate of 8 perc..

  Fed funds rate and the three month treasury narrowed

The Federal funds purchased & repurchase agreements of Washington Mutual Bank declined from 4.1% of assets to .09% of assets between 6/30/2007 and 6/30/2008. The difference between the Fed Funds rate and the three month treasury narrowed as investors..

  Evaluating two different silicon wafer milling machines

You are evaluating two different silicon wafer milling machines. The Techron I costs $225,000, has a three-year life, and has pretax operating costs of $58,000 per year. The Techron II costs $395,000, has a five-year life, and has pretax operating co..

  Which deal is cheaper

A car company is offering a choice of deals. You can receive $2,000 cash back on the purchase or a 2.6 percent APR, 3-year loan. The price of the car is $22,000 and you could obtain a 3-year loan from your credit union, at 6.6 percent APR. Which deal..

  Compute the expected share price at the end

Having issues figuring this one out... Suppose the dividends for the Seger Corporation over the past six years were $1.06, $1.14, $1.23, $1.31, $1.41, and $1.46, respectively. Compute the expected share price at the end of 2014 using the perpetual gr..

  Difference in statement of cash flows and cash flow forecast

Hopefully, this will all help us to learn together and as our week progresses. Please let me know if it does. Briefly explain what you understand by the accruals concept. Briefly describe the difference between a statement of cash flows and a cash fl..

  Creating flow chart to develop new process or procedure

We tend to think of flow charting in terms of improving or documenting an existing process, but can a flowchart also be useful for new processes Why? How? I believe I saw an example or two earlier in the discussion this week. Can you think of other e..

  Defined benefit pension plan has expected payouts

A defined benefit pension plan has expected payouts of $15 million per year for eight years and then $20 million per year over the following 15 years. Actuaries have estimated that the fund can be expected to earn an average of 5.25 percent on its as..

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