The Somerset Company has warrants outstanding that expire in three years. Each warrant entitles the holder to
Question:
The Somerset Company has warrants outstanding that expire in three years.
Each warrant entitles the holder to purchase one share of common stock at an exercise price of $40 per share. Determine the formula value and premium over the formula value if the respective prices of common stock and warrants are: L01
a. $32 per share and $1.50 per warrant
b. $40 per share and $3.50 per warrant
c. $48 per share and $10 per warrant
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