Shanton Corporation could issue 15-year straight debt at a rate of8%. Instead, Shanton issues 15-year debt with a coupon rate of 6%,but each bond has 25 warrants attached. The bonds can be issuedat par ($1,000 per bond). Assuming annual interest payments, whatis the implied value of each warrant? ($6.85)

Shanton Corporation could issue 15-year straight debt at a rate of8%. Instead, Shanton issues 15-year debt with a coupon rate of 6%,but each bond has 25 warrants attached. The bonds can be issuedat par ($1,000 per bond). Assuming annual interest payments, whatis the implied value of each warrant? ($6.85)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter20: Hybrid Financing: Preferred Stock, Warrants, And Convertibles

Section: Chapter Questions

Problem 1P: Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually...

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Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 7% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond?
Waylan Sisters Inc. issued 3-year bonds with a par value of $100,000 and a 6% annual coupon when the market rate of interest was 5%. If the bonds sold at 102.438, how much cash did Williams Sisters Inc. receive from issuing the bonds?
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