Exercise 16-7

Illiad Inc. has decided to raise additional capital by issuing $182,200 face value of bonds with a coupon rate of 11%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of one warrant for each $100 bond sold. The value of the bonds without the warrants is considered to be $146,700, and the value of the warrants in the market is $16,300. The bonds sold in the market at issuance for $154,000.