Question
Stay Swift Corp. is issuing new 9-year bonds with 21 warrants attached to each $1,000 par value bond. Stay Swift Corp. wanted to issue
Stay Swift Corp. is issuing new 9-year bonds with 21 warrants attached to each $1,000 par value bond. Stay Swift Corp. wanted to issue the bonds at par, but a straight-debt bond (without warrants) would have required a 11.20% coupon rate. Instead, the attached warrants allow Stay Swift Corp. to issue the bonds at par with a 6.72% coupon. Select the straight value of the bond and the value of each warrant in the following table. (Note: Assume that the company pays annual coupons.) What is the straight value of the bond? What is the value of each warrant? Value
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
12th Edition
978-0030243998, 30243998, 324422695, 978-0324422696
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