Suppose an all-equity firm has a value of $10,000 and 100 shares outstanding. The firm has issued 25 warrants, each of which may be exchanged for one share. The warrants have an exercise price of $75. If the firm will be worth $9,800 in one period (before exercise), what will the price of the shares be assuming the warrants are exercised?
A) $88.20
B) $91.60
C) $93.40
D) $96.00
E) $98.40

Question

Quizplus · Accepted Answer

The total value of the firm after the exercise of the warrants will be $9,800 + (25 * $75) = $11,675. There will be 125 shares outstanding (100 original shares + 25 new shares from the exercise of warrants). The price per share will be $11,675 / 125 = $93.40.

Suppose an All-Equity Firm Has a Value of $10,000 and 100