omnicent - Surname 1 Surname Institution Professor Course...

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Surname 1 Surname: Institution: Professor: Course: Date: 1.a) shares= 400000 outstanding and the current market value of Omniscient = $12000000 This implies that price per share = 12000000/400000 = $30 b) Since the exercise price is $40, the market value at which the warrant can be exercised = = 40 * 400000 = $16000000 c) i) If market value = 20000000 Then, price per share = 20000000 / 400000 = $50 Since the warrants have been exercised, the company would issue 40,000 share at $40 to its CEO Thus, the new market value would be = = 20000000 + 40000 * 40 = 20000000 + 1600000 = $21600000 Therefore, new price per share = = 21600000/ 440000
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Surname 2 = $49.09 ii) Total Gain for the CEO is = = (49.09 - 40) * 40000 = $363636 iii) If the CEO holds 40,000 call options the share price after the exercise of the options will be =20000000+(40000*50) =22,000,000 22,000,000/440000 = $50 Total gain for the CEO =(50-40)*40000=$400000 2. a i) Conversion ratio = Par value of bond/Current price of stock = $1,000/$ 31.25 = 32 Conversion price = Price per share/Conversion = 31.25/32 = 0.9765 ii) Conversion premium = Par value of bond – (Number of shares x Number of shares per bond) = 1000 – (28 x 31.25) = $125 b) Current conversion value of the bonds = Conversion ratio x Price per share = 32 x 31.25 = $1000 c) Conversion value of bonds if stock price increases by $2 = 32 x 33.25 = $1,064 3. a) Cost of equity = D1 / P0 + g = 2*1.09 / 30 + 9% = 16.27%
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