Maurice Tutor

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About Maurice Tutor

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Expertise:
Algebra,Applied Sciences See all
Algebra,Applied Sciences,Biology,Calculus,Chemistry,Economics,English,Essay writing,Geography,Geology,Health & Medical,Physics,Science Hide all
Teaching Since: May 2017
Last Sign in: 402 Weeks Ago, 2 Days Ago
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Education

  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

Experience

  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 04 Aug 2017 My Price 7.00

Notsoblue Chip Corp

Your client, the Notsoblue Chip Corp., wants to issue $50 million of 10 year debt at par with an 8%
annual coupon (50,000 bonds of $1,000 par value each, with principal to be repaid in year 10).
Your client is willing to attach warrants to the bonds in order to raise the effective yield to 14%, the
yield required by the market for this type of issue. Your problem is designing the bond-warrant
package that will permit your client to implement its financing plan. For this calculation you will
ignore underwriting fees and other expenses.
So far, you have determined that:
? The warrants will expire in 7 years.
? Yield on a seven year government note is 9.0% per annum.
? The current stock price of Notsoblue Chip Corp. is $14 a share.
? The volatility (standard deviation) of the rate of return of Notsoblue Chip Corp. is 65% per
annum.
? Common shares outstanding: 5 million.
? Each warrant will entitle the holder to buy one share of Notsoblue Chip Corp. stock for a
cash exercise price of $20.
? The company has no other warrants or convertibles outstanding.
How many warrants do you need to attach to each bond?
What is the value of each warrant?

Answers

Maurice Tutor
(5)
Status NEW Posted 04 Aug 2017 03:08 PM My Price 7.00

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