Nicolas Lahm is the chief financial officer (CFO) of Lapard Inc. The firm was founded eight years ago to provide business consulting services. Although Lapard Inc. has done well, the firm's founder believes that an industry shakeout is imminent. To survive Lapurd Inc, must grab market share now, and this will requires large infusion of capital

Because he expects eamings to continue rising sharply and looks for the stock price to follow suit, Mr. Lalun does not think it would be wise to issue of commOn stock at this time. On the other hand, interest rates are currently high by historical standards

the interest payments on a new debt issue would be prohibitive. This be has chosen to finance the needed capital using bonds with warrants

Mr Lahm estimates lnc could issue a bond-with watraati package consisting of a 30-year bond and 35 war Each warrant would have a strike price of 530 20 15 years wil expiration. It is estimated that each othea detached and traded separately. would have a value of $8. The coupos 2 mar bad but without warrants wood be 0.

1. What coupon rate should be set on the bond with warrants if the total package is to sell for $1,000?

2. If Lapard Inc. issues 120,000 bond-with-warrant packages, how much cash will Lapard Inc. receive when the warrants are exercised?

3. How many shares of stock will be outstanding after the warrants are exercised? (Lapard Inc. currently has 10 million shares outstanding).