There are 6 million shares of common stock. 

2. A $1000 par value bond with warrant allows the investor to use the warrant and buy 15 shares of common stock at $12 each. 

3. The expiration of warrant is 10 years from now. 

4. The bond is a 10-year bond. Thus, after the warrant is exercised, the bond will have 10 more years before maturity. 

5. There are 30,000 bonds. 

6. The going rate of interest at the beginning is 5%. 

7. The bond with the warrant is offering 4% coupon. 

8. The current value of annual operations and investments of the firms is $125 million and is expected to grow at 4% per year. 

This problem requires calculations in several steps, so expand this file to include your answers. 

A. Calculate the return to warrant holder. 

B. Calculate the value of the firm.

 C. Calculate the value of equity of the firm 

D. Calculate the effective cost of issuing the bond with attached warrants to the company.

Answer rating: 100% (QA)

A Calculate the return to warrant holder The return to the warrant holder can be calculated by finding out the difference between the market price of ... View the full answer