The Redford Investment Company bought 110 Cinema Corp. warrants one year ago and would like to exercise them today. The warrants were purchased at $30 each, and they expire when trading ends today (assume there is no speculative premium left). Cinema Corp. common stock is selling today for $58 per share. The exercise price is $34 and each warrant entitles the holder to purchase two shares of stock, each at the exercise price. a. If the warrants are exercised today, what would the Redford Investment Company's dollar profit or loss be? (Do not round intermediate calculations. Input your dollar answer as a positive value rounded to the nearest whole dollar.) b. What is the Redford Investment Company's percentage rate of return? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Rate of return %

The Redford Investment Company bought 110 Cinema Corp. warrants one year ago and would like to exercise them today. The warrants were purchased at $30 each, and they expire when trading ends today (assume there is no speculative premium left). Cinema Corp. common stock is selling today for $58 per share. The exercise price is $34 and each warrant entitles the holder to purchase two shares of stock, each at the exercise price. a. If the warrants are exercised today, what would the Redford Investment Company's dollar profit or loss be? (Do not round intermediate calculations. Input your dollar answer as a positive value rounded to the nearest whole dollar.) b. What is the Redford Investment Company's percentage rate of return? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Rate of return %

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $21. a. Calculate the exercise value of a warrant at each of the following common stock prices: (1) $20, (2) $25, (3) $30, (4) $100. (Hint: A warrant's exercise value is the difference between the stock price and the purchase price specified by the warrant if the warrant were to be exercised.) If your answer is zero, enter "0". Round your answers to the nearest dollar. (1) $20 $ (2) $25 $ (3) $30 $ (4) $100$ b. Assume the firm's stock now sells for $20 per share. The company wants to sell some 20- year, $1,000 par value bonds with interest paid annually. Each bond will have attached 25 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm's straight bonds yield 12%. Assume that each warrant will have a market value of $3.25 when the stock sells at $20. What coupon interest rate must the company set on the bonds with warrants if…
Igloo Co. sells $397,000 of 12% bonds on June 1, 2020. THe bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2024. THe bonds yield 8%. On October 1, 2021 Igloo buys back $127,040 worth of bonds for $132,040 (includes accrued interest). Prepare the journal 1 entry for the buyback on Oct 1. I know the entry to record interest expense and premium amort for Oct 1 is Interest expense 3743 Premium on bond payable is 1339 Cash 5082 I do not know the entry on Oct 1 to record the buy back of bonds
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On September 1, 2020, Sandhill Corp. sold at 105 (plus accrued interest) 5,190 of its $1,000 face value, 10–year, 10% non–convertible bonds with detachable stock warrants. Each bond carried 2 detachable warrants; each warrant was for one common share at a specified option price of $12 per share. Shortly after issuance, the warrants were selling for $6 each. Assume that no fair value is available for the bonds. Interest is payable on December 1 and June 1. Sandhill Corp. prepares its financial statements in accordance with ASPE. Prepare in general journal format the entry to record the issuance of the bonds under both options available under ASPE.
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Knightly Co’s stock price is currently $10 per share. Knightly's warrants have a price of $7 per warrant. Each warrant enables the holder to purchase three shares of Knightly's common stock for $8 per share. What is the speculative premium on the warrant?
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Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $28. a. Calculate the exercise value of a warrant at each of the following common stock prices: (1) $20, (2) $25, (3) $30, (4) $100. (Hint: A warrant's exercise value is the difference between the stock price and the purchase price specified by the warrant if the warrant were to be exercised.) If your answer is zero, enter "0". Round your answers to the nearest dollar. (1) $20 $ 0 (2) $25 $ 0 (3) $30 $ (4) $100 $ 2 72 b. Assume the firm's stock now sells for $20 per share. The company wants to sell some 20-year, $1,000 par value bonds with interest paid annually. Each bond will have attached 75 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm's straight bonds yield 11%. Assume that each warrant will have a market value of $2.5 when the stock sells at $20. What coupon interest rate must the company set on the bonds with…
Myers Drugs Inc. has 2 million shares of stock outstanding. Earnings after taxes are $9 million. Myers also has warrants outstanding that allow the holder to buy 100,000 shares of stock at $15 per share. The stock is currently selling for $50 per share. a. Compute basic earnings per share. (Do not round intermediate calculations and round your answer to 2 decimal places.) Basic earnings per share b. Compute diluted earnings per share considering the possible impact of the warrants. Assume the cash proceeds are used to repuchase shares. (Do not round intermediate calculations and round your answer to 2 decimal places.) Use the following formula: Earnings after taxes Shares outstanding + Assumed net increase in shares from the warrants Diluted earnings per share
On January 1, 2022, Fancy Co issued $100,000 in 10 year bonds. The bonds have a stated rate of 5% but are issued at a discount as the market rate is 7%. Because the market rate is higher, Fancy receives the present value which is $92,640. The coupon is paid annually on December 31st of each year. Provide the journal entries for Jan 1, 2022, and Dec 31st, 2022.
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2) On January 1, 2020, CBT Corp issued 20,000, 20 year, $1,000 bonds. The bonds have an annual coupon of $50, payable on December 31 of each year. Each bond can be convertible in to five common shares. The bonds sold for 120 and it is estimated that the bonds would have sold for 105 if they did not have the convertible option. Required: a. Prepare the journal entry to recognize the bond sale made by CBT on January 1, 2020. b. On January 1, 2023, 2,000 bonds were converted into common shares. Prepare the journal entry to recognize the conversion transaction.

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