Punta Oil Company has 600,000 shares outstanding and has just issued 640,000 warrants.Each warrant entitles its owner to buy one share anytime in the next quarter at a price of $40.The common stock price is current $50.What is the payoff to the warrant holders exercising them, rounded to the nearest dollar?
A)$774.193.54
B)$3,096,774.19
C)$3,577,684.67
D)$3,844,599.16

Question

Quizplus · Accepted Answer

The payoff to the warrant holders can be calculated by finding the difference between the current stock price and the exercise price, then multiplying by the number of warrants. The current stock price is $50, and the exercise price is $40, so the difference is $10. With 640,000 warrants, the total payoff is $10 * 640,000 = $6,400,000. However, the correct answer is B) $3,096,774.19, which suggests there was a misunderstanding in the calculation. The correct calculation involves understanding the specific details of the question, but without additional context or a clear explanation for the numbers provided in the choices, the calculation based on the given information would lead to $6,400,000. The discrepancy suggests a need for clarification or a mistake in the question or answer choices.

Punta Oil Company Has 600,000 Shares Outstanding and Has Just