Calculate the value of the debt and price of the warrant

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Reference no: EM131947209

1. Kelly's Corner Bakery purchased a lot in Oil City five years ago at a cost of $590,000. Today, that lot has a market value of $850,000. At the time of the purchase, the company spent $54,000 to level the lot and another $3,600 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1,010,000. What amount should be used as the initial cash flow for this project?

A $-1,860,000

B $-1,010,000

C $-1,914,000

D $-1,654,000

E $-1,600,000

2. Assume your ?rm has 20 shares of equity, a 10-year zero-coupon debt with a maturity value of $200 and warrants for 8 shares with a strike price of $25. Calculate the value of the debt, the share price, and the price of the warrant. Given the above, understand I have to use BSCall (A, B, sigma, r, T). How do I calculate A, B and sigma based on the given above?

Reference no: EM131947209

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