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The following data apply to Saunders Corporation: Saunders Corporation currently has 1,000,000 common stocks outstanding. It considers raising $10 million through issuing 20-year 8% coupon bonds – annually paid - with 12 warrants. Each bond has a face value of $1,000. Each warrant gives the holder the right to purchase one share of stock. The bonds will be sold at par. Each warrant has a strike price of $24 and 10 years until expiration. The interest rate of 20-year annual payment bond without warrants is 10%. Assume the total value of Saunders Corporation right before the warrants will be exercised is $74 million What will be the total value, in millions, of Saunders Corporation at Year 10 after the warrants are exercised?

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Financial Management, Finance

Category:- Financial Management
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