What is the value of each warrant

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A firm currently has 20,000,000 shares with a price of $40 per share. They want to issue another 2,000,000 shares so they give each shareholder the right to buy .1 shares of new stock for $3 (it will take ten rights to buy one new share for $30). How much are each of those rights worth?

a) $0.52 b) $.76 c) $.91 d) $1.11

Thomson Engineering is issuing new 12-year bonds that have 15 warrants attached. If not for the attached warrants, the bonds would carry a 9% interest rate. However, with the warrants attached the bonds will pay a 8% annual coupon and still sell for the face value of $1,000. What is the value of each warrant? a) $4.77 b) $6.14 c) $7.16 d) $9.28

Reference no: EM131511111

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