Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. ginger manufacturing is considering several financ

Ginger Manufacturing is considering several financing alternatives, including issuing a bond with warrants attached. The...

50.1K

Verified Solution

Question

Finance

Ginger Manufacturing is considering several financing alternatives, including issuing a bond with warrants attached. The firms current stock price is $22 and the cost of a 20-year, annual coupon bond without warrants would be 10%. Such an issue would have 30 warrants attached, each with an exercise price of $26 to each $1,000 bond. The estimated value per warrant is $3.25. A) What coupon rate should be set on the bond with warrants if the total package is to sell for $1,000? B) If Ginger Manufacturing issues 100,000 bond-with-warrant packages, how much cash will the firm receive when the warrants are exercised? How many shares of stock will be outstanding after the warrants are exercised? (Ginger currently has 20 million shares outstanding). C) Assuming Ginger Manufacturing has a value of operations of $600 million, short term investments of $25 million, an expected growth rate of 7.5% and that the warrants will be exercised in 10 years, what is the rate of return for the investors who exercise the warrants?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students