5. XYZ Corp.s stock is currently selling at $13 per share. There are 1 million shares outstanding. The firm is planning to raise $2million to finance a new project. What is the ex-right stock price, the value of a right, and the appropriate subscription prices, if (a) Two share of outstanding stock are entitled to purchase one additional share of the new issue. (b) Four shares of outstanding stock are entitled to purchase one additional share of the new issue. (c) How does the stockholders wealth change from a to b?

8. ABC Corp. has 4 million shares of common stock outstanding. The company has 500,000 warrants being traded in the market. Each warrant has the right to buy one share of common stock at $20 per share. The warrant will expire one year from today. ABC Corp. stock is selling for $22 per share and the volatility of the return on stock is 0.005. The risk-free rate is 5 percent. Estimate the warrant value