Coupon rate needs to be set on this bond with warrants issue

Assignment Help Financial Management
Reference no: EM131044131

A company wishes to issue a 10-year bond. To lower it's cost of debt, the company attaches 25 warrants to each bond. Each warrant has a strike(EG exercise) price of $25 and 5 years until expiration. Investment bankers estimate the warrant's value to be $5. Bonds with the same terms(less the warrants) yield 8%. What coupon rate needs to be set on this bond with warrants issue to make the entire package sell for $1000? Complete the two step process and show work. How much equity capital will the company raise if all warrants are exercised in the above example?

Reference no: EM131044131

Questions Cloud

Describe law enforcement culture : Discuss the organizational theories that apply to law enforcement and criminal justice agencies. Address arguments that can be raised against the policy to illustrate typical organizational behavior.
Have worked on a high-performing team : 1. Before beginning this post, reflect on at least one behavior that you could change to support a sustainable future. Include the following in your discussion post:
Differences among the theories of goal setting : 1. Compare and contrast the significant similarities and differences among the theories of goal setting, self-efficacy, and reinforcement. 2. Specify the theory that you believe most closely aligns with your current or future approach to motivating..
The maximum federal tax rate on personal income : The maximum federal tax rate on personal income in 2010 was 50%. Since companies can deduct dividends paid but not interest paid, our tax system favors the use of equity financing over debt financing, and this causes companies' debt ratios to be lowe..
Coupon rate needs to be set on this bond with warrants issue : A company wishes to issue a 10-year bond. To lower it's cost of debt, the company attaches 25 warrants to each bond. Each warrant has a strike(EG exercise) price of $25 and 5 years until expiration. What coupon rate needs to be set on this bond with ..
Explain in details macroeconomics balance as a basic concept : Write an essay to explain in details macroeconomics balance as a basic concept of modern economics.
Identifying ways to improve internal processes : Internal processes of a company contribute to the company's overall effectiveness. Identifying ways to improve internal processes helps build a highly efficient organization. Root causes need to be identified. Methods to identify root causes may r..
What is default risk premium on the corporate bond : A Treasury bond that matures in 14 years has a yield of 4.33%. A 14-year corporate bond has a yield of 7.39%. Assume that the liquidity premium on the corporate bond is 0.33%. What is the default risk premium on the corporate bond?
Hr director of a large corporation : Tell me why it is important to understand HRIS if you worked as a HR Director of a large corporation (Base your introduction on our reading material from week 1-5) - Also, construct your introduction from the requirements that you select below)

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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