1. Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $28.

a. 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 10%. Assume that each warrant will have a market value of $3.75 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. %

b. 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.

2. Harmeling Paint Ball (HPB) Corporation needs a new air compressor that costs $80,000. HPB will need it for only 5 years even though the compressor's economic life is long enough so that the lease is an operating lease. The firm can lease the compressor for 5 years with $35,000 lease payments at the end of each year. HPB's cost of debt is 13%. Answer the following questions. (Hint: See Table 19-1.)

a. What is the initial lease liability that must be reported on the balance sheet? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your answer as a positive value.

$

a. What is the initial right-of-use asset? Do not round intermediate calculations. Round your answer to the nearest cent.

$

c. What will HPB report as the Year-1 lease expense? Round your answer to the nearest cent. Enter your answer as a positive value.

$

d. What is the Year-1 imputed interest expense? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your answer as a positive value.

$

e. What lease liability must be reported at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your answer as a positive value.

$

f. What right-of-use asset must be reported at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent.

$