Question

2. Babcock Industries has just sold a bond issue with 10 warrants attached to each bond....

2. Babcock Industries has just sold a bond issue with 10 warrants attached to each bond. The bonds have a 20-year maturity, an annual coupon rate of 12%. They sold at an original offering price of $1,000. The current yield-to-maturity of bonds of equal risk, but without warrants is 15%. What is the value of each warrant?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Value of each warrant:

= ($1,000-$812.22)10

= $187.78/10

= $18.78

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Cuba inc just sold a bond with 40 warrants attached. the bonds have a 15 year...
Cuba inc just sold a bond with 40 warrants attached. the bonds have a 15 year maturity and an annual coupons of 11% and they were issued at thier )1000 par value. The current yield on similar straight bonds is 13%.what is the implied value of each warrant
ABC Company is planning to issue 20,000 bonds with warrants attached. The bonds will make annual...
ABC Company is planning to issue 20,000 bonds with warrants attached. The bonds will make annual interest payments of 6.8% and will have a 20-year maturity. There will be 75 warrants attached to each bond, with each warrant giving the right to purchase one share of stock at a price of $12. A similar straight-debt issue would require a 10% coupon rate. Total assets before issuance equal $120 million, with $50 million of liabilities. What is the value of the...
ABC Company is planning to issue 20,000 bonds with warrants attached. The bonds will make annual...
ABC Company is planning to issue 20,000 bonds with warrants attached. The bonds will make annual interest payments of 6.8% and will have a 20-year maturity. There will be 75 warrants attached to each bond, with each warrant giving the right to purchase one share of stock at a price of $12. A similar straight-debt issue would require a 10% coupon rate. Total assets before issuance equal $120 million, with $50 million of liabilities. What is the value of the...
Calmer Inc. plans to issue 20-year bonds with annual interest payments and with 20 warrants attached....
Calmer Inc. plans to issue 20-year bonds with annual interest payments and with 20 warrants attached. Each warrant is expected to have a value of $0.50. A similar straight-debt issue would require an 12% coupon. What coupon rate should be set on the bonds-with-warrants so that the bond will sell for $1,000?
A bond with 25 detachable warrants has just been offered for sale at $1,000. The bond...
A bond with 25 detachable warrants has just been offered for sale at $1,000. The bond matures in 15 years and has an annual coupon of $120. Each warrant gives the owner the right to purchase two shares of stock in the company at $14 per share. Ordinary bonds (with no warrants) of similar quality are priced to yield 17 percent. What is the value of one warrant?
A bond with 10 detachable warrants has just been offered for sale at $1,000. The bond...
A bond with 10 detachable warrants has just been offered for sale at $1,000. The bond matures in 10 years and has an annual coupon of $53. Each warrant gives the owner the right to purchase two shares of stock in the company at $47 per share. Ordinary bonds (with no warrants) of similar quality are priced to yield 7 percent. What is the value of one warrant? (Do not round intermediate calculations and round your answer to 2 decimal...
Troy has decided to sell $3 million of 10 year debentures with warrants at their $1,000...
Troy has decided to sell $3 million of 10 year debentures with warrants at their $1,000 face value. The debentures carry a coupon of 12%. Each debenture will have attached 10 warrants, each warrant exercisable into two shares of common stock at an exercise price of $35. Each warrant is expected to trade at a market value of $5. Currently Troy has only one outstanding issue of straight debentures which trade to yield 14%. These debentures will mature in 10...
Srorm Software wants to issue $80 million ($800 x 100,000 bonds) in new capital to fund...
Srorm Software wants to issue $80 million ($800 x 100,000 bonds) in new capital to fund new opportunities. If Storm raised the $80 million of new capital in a straight-debt 20-year bond offering, Storm would have to offer an annual coupon rate of 12%. However, Storm's advisers have suggested a 20-year bond offering with warrants. According to the advisers, Storm could issue 8% annual coupon-bearing debt with 24 warrants per $800 face value bond. Storm has 10 million shares of...
Warren Corporation’s stock sells for $40 per share. The company wants to sell some 10-year maturity,...
Warren Corporation’s stock sells for $40 per share. The company wants to sell some 10-year maturity, semi-annual annual coupon payments bond at $1,000 (par value). Each bond would have 30 warrants attached to it, each exercisable into one share of stock at an exercise price of $45. The firm’s straight bonds yield to maturity is 10%. Each warrant is expected to have a market value of $4 given that the stock sells for $42. What annual coupon rate must the...
Warren Corporation’s stock sells for $40 per share. The company wants to sell some 10-year maturity,...
Warren Corporation’s stock sells for $40 per share. The company wants to sell some 10-year maturity, semi-annual annual coupon payments bond at $1,000 (par value). Each bond would have 40 warrants attached to it, each exercisable into one share of stock at an exercise price of $45. The firm’s straight bonds yield to maturity is 10%. Each warrant is expected to have a market value of $5 given that the stock sells for $42. What annual coupon rate must the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT