A company with 2 million shares worth £40 each is considering issuing 300000 warrants each giving the holder the right to buy one share with a strike price of £60 in 5 years. The interest risk-free rate is 3% per annum and the annualized volatility is 30%, and the risk-neutral probabilities: delta and N(-d2) are 0.4819 and 0.7631 respectively. What is the total cost of the warrant issue? How should it affect the price per share?

Answer rating: 100% (QA)

Please ... View the full answer