A firm is issuing bonds with warrants. Someone buying 1 package would receive a 6% coupon interest

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A firm is issuing bonds with warrants. Someone buying 1 package would receive a 6% coupon interest rate, 20-year bond plus 10 warrants. Each warrant is with $30 strike price and 10 years maturity.

Currently each warrant's value is estimated to be $5.

Stock share price is estimated to be $50 after 10 years.

What is the cost for the firm to issue warrant in rate (cost of warrant rW)?

Related Book For answer-question

Financial Management Theory and Practice

ISBN: 978-1305632295

15th edition

Authors: Eugene F. Brigham, Michael C. Ehrhardt

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Posted Date: May 05, 2024 11:21 AM

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A firm is issuing bonds with warrants. Someone buying 1 package would receive a 6% coupon interest

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To calculate the cost of issuing the warrants rW we need to determine the value of the warrants and ... View the full answer

Financial Management Theory and Practice

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