Bonus Problem ( 5 points ) Use problem I as a reference for information related to this problem ... Suppose Lucky Industries is considering issuing a callable bond with warrants instead of issuing a callable convertible bond . The bond is the same callable bond , 20 year , $1000 par , 6.5% semi - annual coupon priced at 89 . 275% of par , callable after 6 years at 110.5% . Instead of it being convertible to stock , the company will issue 30 warrants per bond with an exercise price of $20 that expire in 5 years . Assume the stock is currently priced at $17 . Also assume the stock will be worth the value you calculated in problem 1 part @ ) in 5 years . a ) ( 1 point ) What is the initial value of the warrant ? b ) ( 1 point ) What is the value of the warrant in year 5 ?) C ) (3 points ) What is the cost of the warrant R ( W ) and the pretax cost of the debt with warrants R ( d ) ? ( Hint :" remember to use a weighted average calculation to calculate the cost of the bond with warrants )