hybrid costing3

hybrid costing3 - Warrants i . Answer: c Diff: M Which of...

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Warrants Answer: c Diff: M i . Which of the following statements is most correct? a. A warrant is basically a long-term option that enables the holder to sell common stock back to the firm at an agreed upon price, at a specified time in the future. b. Generally, warrants are distributed along with preferred stock in order to make the preferred stock less risky. c. If a company issuing coupon-paying debt wanted to reduce the cash outflows associated with the coupon payments, it could issue warrants with the debt to accomplish this. d. One of the disadvantages of warrants to the issuing firm is that they are detachable and can be traded separately from the debt with which they are issued. e. Warrants are attractive to investors because when they are issued with stock investors receive dividends on the warrants they own, as well as on the underlying stock. Bond with warrants Answer: e Diff: M ii . The straight-debt value of a 20-year, 10 3/8 annual coupon bond with 30 warrants is $760.00, and the bond would sell at par of $1,000
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hybrid costing3 - Warrants i . Answer: c Diff: M Which of...

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