[1.] Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with an 8% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond? Do not round intermediate calculations. Round your answer to the nearest cent.

$__________

[2.] Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $27.

a. Calculate the exercise value of a warrant at each of the following common stock prices: (1) $20, (2) $25, (3) $30, (4) $100. (Hint:A warrant's exercise value is the difference between the stock price and the purchase price specified by the warrant if the warrant were to be exercised.) If your answer is zero, enter "0". Round your answers to the nearest dollar.

(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 par value bonds with interest paid annually. Each bond will have attached 75 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm's straight bonds yield 12%. Assume that each warrant will have a market value of $2.5 when the stock sells at $20. What coupon interest rate must the company set on the bonds with warrants if they are to clear the market? (Hint:The convertible bond should have an initial price of $1,000.) Do not round intermediate calculations. Round your answer to two decimal places.

_________%

What dollar coupon must the company set on the bonds with warrants if they are to clear the market? (Hint:The convertible bond should have an initial price of $1,000.) Do not round intermediate calculations. Round your answer to the nearest dollar.

$ __________

[3.] The Tsetsekos Company was planning to finance an expansion. The principal executives of the company all agreed that an industrial company such as theirs should finance growth by means of common stock rather than by debt. However, they felt that the current $37 per share price of the company's common stock did not reflect its true worth, so they decided to sell a convertible security. They considered a convertible debenture but feared the burden of fixed interest charges if the common stock did not rise enough in price to make conversion attractive. They decided on an issue of convertible preferred stock, which would pay a dividend of $2.40 per share.

a. The conversion ratio will be 1.0; that is, each share of convertible preferred can be converted into a single share of common. Therefore, the convertible's par value (and also the issue price) will be equal to the conversion price, which in turn will be determined as a premium (i.e., the percentage by which the conversion price exceeds the stock price) over the current market price of the common stock. What will the conversion price be if it is set at a 14% premium? Round your answer to the nearest cent.

$_________

At a 30% premium? Round your answer to the nearest cent.

$_________