Your firm is growing rather rapidly. Therefore, you are considering issuing $40 million in bonds with warrants attached. Using the information provided below, identify the intrinsic value for each warrant if the bonds with warrants are purchased at par value.

HINT: In order to find the price of each warrant, identify the true value of the bond (as done in the core course) to back out the difference in the value of the bond relative to the face value. Then divide this amount by the number of warrants attached to find the value per warrant.

Given Information: Bond with Warrants Par Value & Issue Price $2,000 Coupon Rate (Semi-Annual 8.75% Maturity in Years 10 Conversion Ratio (Shares per Bond N/A Warrants Attached 25 Warrant Exercise Price $49.00 Warrant Expiration in Years 3 Current Stock Price $37.00 Call Protection in Years Not Callable Call Price N/A YTM on Similar Straight Bonds 8.00%