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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