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?

Question

Quizplus · Accepted Answer

M = 640,000,N = 600,000,V = $50 x 600,000 = $30 million,X = $40
A.m / (n + m)* (V - (n * X))= 0.64 / (1.24)* (30 - (0.6*40))= $3,096,774.19

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