Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per

Question:

Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $29.
a. Calculate the exercise value of the firm's warrants if the common sells at each of the following prices:
1) $20
2) 25
3) 30
4) 100
b. Assume the firm's stock now sells for $20 per share. The company wants to sell some 20-year, $1,000 bonds with interest paid annually. Each bond will have attached 100 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm's straight bonds yield 9%. Assume that each warrant will have a market value of $3.75 when the stock sells at $20. What interest rate must the company set on the bonds with warrants if they are to clear the market?
c. What dollar must the company set on the bonds with warrants if they are to clear the market?
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...