hybrid costing11

# hybrid costing11 - Value of warrants i Diff M Moore...

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Value of warrants Answer: c Diff: M i . Moore Securities recently issued 30-year bonds with a 7 percent annual coupon at par (\$1,000). The bonds also had 20 warrants attached. If Moore were to issue straight debt, the interest rate would be 9 percent. What is the value of each warrant? a. \$ 5.00 b. \$ 7.96 c. \$10.27 d. \$18.00 e. \$39.78 Value of warrants Answer: b Diff: M ii . Crerand Co. just issued 20-year noncallable bonds with a par value of \$1,000, and a yield to maturity of 11 percent. At the same time, the company issued a package of 20-year noncallable bonds, with an annual coupon of 8 percent and 25 warrants attached to each bond. The value of this package is \$1,000. What is the value of each of the warrants? a. \$ 7.17 b. \$ 9.56 c. \$ 30.44 d. \$ 32.83 e. \$238.90 Tough: Lease analysis Answer: b Diff: T iii . Furman Industries is negotiating a lease on a new piece of equipment that would cost \$100,000 if purchased. The equipment falls into the MACRS 3-year class, and it would be used for 3 years and then sold, because Furman plans to move to a new facility at that time. The applicable MACRS depreciation rates are 0.33, 0.45, 0.15, and 0.07.

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