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Valuation Of Warrants And Convertible Securities In Corporate Finance

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Valuation of Warrants and Convertible Securities in Corporate FinanceWarrants6.)Pogue Industries Inc. has warrants outstanding that permit its holders to purchase 1 shareof stock per warrant at a price of $24. (Refer to Chapter 18 for parts a, b,and c.)a.Calculate the exercise value of Pogue's warrants if the common stock sells at each of theprices given below. Round your answers to two decimal places.PsExercise value$18$0$21$0$25$1$70$46b.INCORRECTAt what approximate price do you think the warrants would actually sell undereach condition given below? Round your answers to two decimal places.PsWarrantPremium$18$ 1$6.50$21$ 2$4.00$25$4$1.50$70$ 50$1.007.)In the summer of 2012, the Hadaway Company was planning to finance an expansion witha convertible security. They considered a convertible debenture but feared the burden of fixedinterest charges if the common stock did not riseenough to make conversion attractive. Theydecided on an issue of convertible preferred stock, which would pay a dividend of $1.05 pershare.The common stock was selling for $21 a share at the time. Management projected earningsfor 2012 at $1.50 a share and expected a future growth rate of 10% a year in 2013 andbeyond. It was agreed by the investment bankers and management that the common stockwould continue to sell at 14 times earnings, the current price/earnings ratio.

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