3. Warrants Aa Aa Warrants are long-term options to buy a stated number of common shares at a specified price that is generally attached to debt issues. Warrants give bond investors the chance to profit from the firm's upside potential, leading some to compare warrants to a long-term ca option. However, some factors distinguish warrants from ca options. Which of the following statements about their differences is correct? O Exercising warrants can lead to the dilution of existing shareholders' value O Exercising call options can lead to the dilution of existing shareholders' value Sally Rubber Co. is issuing new 11-year bonds with 23 warrants attached to each $1,000 par value bond. Sally Rubber Co. wanted to issue the bonds at par, but a straight-debt bond (without warrants) would have required a 14.40% coupon rate. Instead, the attached warrants allow Sally Rubber Co. to issue the bonds at par with a 8.64% coupon. Calculate the straight value of the bond and the value of each warrant in the following table. (Note: Assume that the company pays annual coupons.) Value What is the straight value of the bond? What is the value of each warrant