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Mark Labs. Issued 100 bonds, $100 par, each with a detachable stock warrants. Each warrant maybe...

Mark Labs. Issued 100 bonds, $100 par, each with a detachable stock warrants. Each warrant

maybe exercised to purchase 1 share of $100 par common stock. THE TOTAL SELLING

PRICE IS THE PAR OF $10,000. At the time of the sale, the market value of the bonds (without

the warrants) is 102, while the market value of each warrants is $30.

REQUIRED: Allocate the $10,000 between the Bonds and the Warrants

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Answer #1

We will allocate $10000 on the basis of market value of bonds and warrants

Particulars Rate Number Amount Basis Basis in %age Allocation of $10000
Market Value of bonds 102 100 10200 102/132 0.7727 7727.272727
Market Value of warrant 30 100 3000 30/132 0.2273 2272.727273
Total 13200 1.0000 10000

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