Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Through Fire, Incorporated, an all - equity firm, has five shares of stock outstanding. Yesterday, the firm's assets consisted of six ounces of platinum, currently

Through Fire, Incorporated, an all-equity firm, has five shares of stock outstanding. Yesterday, the firm's assets consisted of six ounces of platinum, currently worth $1,910 per ounce. Today, the company issued Janet Wu a warrant for its fair value of $1,910. The warrant gives Janet the right to buy a single share of the firm's stock for $2,160 and can be exercised only on its expiration date one year from today. The firm used the proceeds from the issuance to immediately purchase an additional ounce of platinum.
a.
What was the price of a single share of stock before the warrant was issued? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.)
b. What was the price of a single share of stock immediately after the warrant was issued? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.)
c. Suppose platinum is selling for $2,110 per ounce on the warrant's expiration date in one year. What will be the value of a single share of stock on the warrant's expiration date? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Finance Theory And Practice

Authors: M. Marlow

1st Edition

0030969603, 978-0030969607

More Books

Students also viewed these Finance questions