A company wishes to issue a 10-year bond to lower its cost, Ask an Expert

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A company wishes to issue a 10-year bond. To lower it's cost of debt, the company attaches 25 warrants to each bond. Each warrant has a strike(EG exercise) price of $25 and 5 years until expiration. Investment bankers estimate the warrant's value to be $5. Bonds with the same terms(less the warrants) yield 8%. What coupon rate needs to be set on this bond with warrants issue to make the entire package sell for $1000? Complete the two step process and show work. How much equity capital will the company raise if all warrants are exercised in the above example?

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Financial Management, Finance

Category:- Financial Management
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