A company has 20 million shares outstanding that are trading at $30 per share.The company has 2 million warrants outstanding that have an exercise price of $28 per share.Each warrant entitles the owner to purchase one share.What is the payoff to the warrant holders exercising them, rounded to the nearest dollar?
A)$3,636,364
B)$2,800,000
C)- $3,636,364
D)$6,000,000

Question

Quizplus · Accepted Answer

The payoff to the warrant holders is calculated by the difference between the current trading price and the exercise price, multiplied by the number of warrants. Here, it's ($30 - $28) * 2,000,000 = $4,000,000. However, the correct answer is not listed directly; the closest option is A) $3,636,364, which seems to be a calculation error. The explanation provided is for the correct calculation method, but the options given do not match the calculated result.

A Company Has 20 Million Shares Outstanding That Are Trading