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Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 9% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond? Round your answer to the nearest cent.
Lifecycle Motorcycle Company is expected to pay a dividend in year 1 of $2.00, a dividend in year 2 of $2.80, and a dividend in year 3 of $3.20. After year 3, dividends are expected to grow at the rate of 6% per year. An appropriate required return f..
Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.89 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. What is the maximum initial cost the co..
You are evaluating two different silicon wafer milling machines. The Techron I costs $228,000, has a three-year life, and has pre-tax operating costs of $59,000 per year. The Techron II costs $400,000, has a five-year life, and has pre-tax operating ..
Pierre Imports recently issued two types of bonds. The first issue consisted of 10-year straight debt with a 9 percent annual coupon. The second issue consisted of 10-year bonds with a 8 percent annual coupon and attached warrants. Discuss 3 advantag..
Puckett Products is planning for $4.7 million in capital expenditures next year. Puckett's target capital structure consists of 60% debt and 40% equity. If net income next year is $2.5 million and Puckett follows a residual distribution policy with a..
Frank's is a furniture store that is considering adding appliances to its offerings. Which one of the following is the best example of an incremental cash flow related to the appliances?
Dulles Electric Company buys 1 million tons of coal annually to burn at its power plant. The company wants to invest in a unit train that will haul coal from the mine to the power house, where it is dumped in a large field. Find the optimal capacity ..
Your wellness clinic wants to develop a product cost for the following activities using labor expense and supply expense to assign direct cost and visit minutes as a cost driver to assign indirect costs. Projected total costs for your wellness clinic..
The gain from a one-year project is uniformly distributed between -$2 million and +$8 million. What is the one-year 99% value at risk? What is the one-year 99% expected shortfall?
The Holly Corporation has a new rights offering that allows you to buy one share of stock with 4 rights and $25 per share. The stock is now selling ex-rights for $30. The price rights-on is: A. $21.00. B. $25.00. C. $30.00. D. $31.25. E. impossible t..
Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $410,000 is estimated to result in $160,000 in annual pretax cost savings. The shop’s tax rate is 30 percent and its disc..
Before going into year-end closing a company has operating income of $40,000 with a marginal tax rate of 25%. Operating assets are $500,000 and operating liabilities are $200,000. What is the RNOA?
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