Superior Clamps, Inc., has a capital structure consisting of 8.4 million shares of common stock a...
|
Superior Clamps, Inc., has a capital structure consisting of 8.4 million shares of common stock and 914,000 warrants. Each warrant gives its owner the right to purchase one share of newly issued common stock for an exercise price of $22.30. The warrants are European and will expire one year from today. The market value of the company's assets is $171.3 million, and the annual variance of the returns on the firm's assets is .25. Treasury bills that mature in one year yield a continuously compounded interest rate of 8.4 percent. The company does not pay a dividend. Use the Black–Scholes model to determine the value of a single warrant. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Value of one warrant | $ |
Homework Answers
Spot price= $171.3/8.4 = $ 20.39
Strike Price= $22. 30
Volatility= 25%
Risk free rate= 8.4%
So, the warrant value using Black-Scholes model= $1.54 approx
Add Answer to:
Superior Clamps, Inc., has a capital structure consisting of 8.4 million shares of common stock a...
Gary Levin is the chief executive officer of Mountainbrook Trading Company. The board of directors has just granted Mr....
Gary Levin is the chief executive officer of Mountainbrook Trading Company. The board of directors has just granted Mr. Levin 48,000 at-the-money European call options on the company's stock, which is currently trading at $35 per share. The stock pays no dividends. The options will expire in five years and the standard deviation of the returns on the stock is 56 percent. Treasury bills that mature in five years currently yield a continuously compounded interest rate of 5.5 percent. a....
Gary Levin is the chief executive officer of Mountainbrook Trading Company. The board of directors has...
Gary Levin is the chief executive officer of Mountainbrook Trading Company. The board of directors has just granted Mr. Levin 42,000 at-the-money European call options on the company’s stock, which is currently trading at $32 per share. The stock pays no dividends. The options will expire in five years and the standard deviation of the returns on the stock is 56 percent. Treasury bills that mature in five years currently yield a continuously compounded interest rate of 8.2 percent. a....
Hankins Corporation has 8.4 million shares of common stock outstanding, 590,000 shares of 7.4 percent preferred stock ou...
Hankins Corporation has 8.4 million shares of common stock outstanding, 590,000 shares of 7.4 percent preferred stock outstanding, and 184,000 of 8.6 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $64.90 per share and has a beta of 1.29, the preferred stock currently sells for $107.10 per share, and the bonds have 13 years to maturity and sell for 91.5 percent of par. The market risk premium is 7 percent, T-bills are yielding 5.7...
Problem 23-2 Employee Stock Options Jared Lazarus has just been named the new chief executive officer...
Problem 23-2 Employee Stock Options Jared Lazarus has just been named the new chief executive officer of BluBell Fitness Centers, Inc. In addition to an annual salary of $632,500, his three-year contract states that his compensation will include 29,250 at-the-money European call options on the company's stock that expire in three years. The current stock price is $50 per share and the standard deviation of the returns on the firm's stock is 60 percent. The company does not pay a...
Titan Mining Corporation has 8.4 million shares of common stock outstanding and 280,000 6 percent semiannual...
Titan Mining Corporation has 8.4 million shares of common stock outstanding and 280,000 6 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $32 per share and has a beta of 1.2, and the bonds have 20 years to maturity and sell for 113 percent of par. The market risk premium is 7.2 percent, T-bills are yielding 5 percent, and Titan Mining’s tax rate is 40 percent. a. What is the firm's market value...
Jared Lazarus has just been named the new chief executive officer of BluBell Fitness Centers, Inc....
Jared Lazarus has just been named the new chief executive officer of BluBell Fitness Centers, Inc. In addition to an annual salary of $655,000, his three-year contract states that his compensation will include 17,750 at-the-money European call options on the company’s stock that expire in three years. The current stock price is $62 per share and the standard deviation of the returns on the firm’s stock is 65 percent. The company does not pay a dividend. Treasury bills that mature...
Raymond Mining Corporation has 8.4 million shares of common stock outstanding, 280,000 shares of 6% $100...
Raymond Mining Corporation has 8.4 million shares of common stock outstanding, 280,000 shares of 6% $100 par value preferred stock outstanding, and 141,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $32 per share and has a beta of 1.20, the preferred stock currently sells for $94 per share, and the bonds have 20 years to maturity and sell for 113% of par. The market risk premium is 7.2%, T-bills are yielding 5%, and...
Big Bob Corporation has a present capital structure consisting of common stock (10 million shares) and...
Big Bob Corporation has a present capital structure consisting of common stock (10 million shares) and debt ($140 million, 6% coupon rate). The company needs to raise $46 million and is undecided between two financing plans. Plan A: Equity financing. Under this plan, an additional common stock will be sold at $15 per share. Plan B: Debt financing. Under this plan, the firm will issue 10% coupon bonds. At what level of operating income (EBIT) will the firm be indifferent between the two...
A company has 8.6 million shares of common stock outstanding, 300,000 shares of 5 percent preferred...
A company has 8.6 million shares of common stock outstanding, 300,000 shares of 5 percent preferred stock outstanding, and 160,000 7.4 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $34 per share and has a beta of 1.30, the preferred stock currently sells for $84 per share, and the bonds have 15 years to maturity and sell for 115 percent of par. The market risk premium is 7.4 percent, T-bills are yielding 3 percent,...
A company has 10.1 million shares of common stock outstanding, 450,000 shares of 5 percent preferred...
A company has 10.1 million shares of common stock outstanding, 450,000 shares of 5 percent preferred stock outstanding, and 235,000 8.9 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $49 per share and has a beta of 1.55, the preferred stock currently sells for $99 per share, and the bonds have 15 years to maturity and sell for 116 percent of par. The market risk premium is 8.9 percent, T-bills are yielding 4 percent,...
Gary Levin is the chief executive officer of Mountainbrook Trading Company. The board of directors has just granted Mr. Levin 48,000 at-the-money European call options on the company's stock, which is currently trading at $35 per share. The stock pays no dividends. The options will expire in five years and the standard deviation of the returns on the stock is 56 percent. Treasury bills that mature in five years currently yield a continuously compounded interest rate of 5.5 percent. a....
Problem 23-2 Employee Stock Options Jared Lazarus has just been named the new chief executive officer of BluBell Fitness Centers, Inc. In addition to an annual salary of $632,500, his three-year contract states that his compensation will include 29,250 at-the-money European call options on the company's stock that expire in three years. The current stock price is $50 per share and the standard deviation of the returns on the firm's stock is 60 percent. The company does not pay a...
A company has 10.1 million shares of common stock outstanding, 450,000 shares of 5 percent preferred stock outstanding, and 235,000 8.9 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $49 per share and has a beta of 1.55, the preferred stock currently sells for $99 per share, and the bonds have 15 years to maturity and sell for 116 percent of par. The market risk premium is 8.9 percent, T-bills are yielding 4 percent,...
Most questions answered within 3 hours.
-
Executive Program Practical Connection Assignment
Subject : Operations Security.
Assignment:
Provide a reflection of at least...
asked 2 minutes ago -
Every time Casey is at bat he has a 0.4 probability of
getting on base (assume...
asked 10 minutes ago -
The Walston Company is to be liquidated and has the following
liabilities:
Income taxes
$
9,400...
asked 17 minutes ago -
If
the more comprehensive data is available in MEPS, why does the NHIS
still exist? How...
asked 39 minutes ago -
Koo argues that the Japanese economy in the 1990s suffered from
a balance sheet recession. What...
asked 32 minutes ago -
Automobile mechanics conduct diagnosis tests on 150 new cars of
particular make and model to determine...
asked 26 minutes ago -
11) Find the proceeds of a 5 year non-interest
bearing note for $6500 discounted 2.5 years...
asked 33 minutes ago -
Required: Prepare the consolidated financial statements of
Griffin Ltd at 30 June 2019.
Griffin Ltd is...
asked 42 minutes ago -
1.How large must the coefficient of static friction be between
the tires and the road if...
asked 57 minutes ago -
What is the time complexity (Big-O) of the following code?
class Main
{
// Recursive...
asked 57 minutes ago -
Economists look at any situation in terms of its component
parts: the people making decisions, the...
asked 1 hour ago -
What is a population?
Select one:
a. All of the individual organisms belonging to the same...
asked 1 hour ago