Moose Stores has outstanding one million shares of common stock with a total market value of $40
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Moose Stores has outstanding one million shares of common stock with a total market value of $40 million. It now announces an issue of one million warrants at $5 each. Each warrant entitles the owner to buy one Moose share for a price of $30 any time within the next five years. Moose Stores has stated that it will not pay a dividend within this period. The standard deviation of the returns on Moose’s equity is 20 percent a year, and the interest rate is 8 percent.
(a) What is the market value of each warrant?
(b) What is the market value of each share after the warrant issue?
Common StockCommon stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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a The Moose Stores warrant issue is large relative to th...View the full answer
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Related Book For 
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
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