Your firm has 3 million shares of equity and 100,000 warrants. Each warrant gives its owner...
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Your firm has 3 million shares of equity and 100,000 warrants. Each warrant gives its owner the right to purchase one share of newly issued equity for an exercise price of €15. The warrants are European and will expire one year from today. The market value of the company's assets is €60 million, and the annual standard deviation of the returns on the firm's assets is 24 per cent. Treasury bills that mature in one year yield a continuously compounded interest rate of 2 per cent. The company does not pay a dividend. Use the Black-Scholes model to determine the value of a single warrant. (30 marks) Your firm has 3 million shares of equity and 100,000 warrants. Each warrant gives its owner the right to purchase one share of newly issued equity for an exercise price of €15. The warrants are European and will expire one year from today. The market value of the company's assets is €60 million, and the annual standard deviation of the returns on the firm's assets is 24 per cent. Treasury bills that mature in one year yield a continuously compounded interest rate of 2 per cent. The company does not pay a dividend. Use the Black-Scholes model to determine the value of a single warrant. (30 marks)
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Related Book For
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
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