Chapter_23Warrants and Convertibles(公司金融,英文版).pptVIP

Slides by Matthew Will Topics Covered What is a Warrant? What is a Convertible Bond? The Difference Between Warrants and Convertibles Why do Companies Issue Warrants and Convertibles? Warrant Value Warrant Value vs. Stock Price United Glue Warrants # shares outstanding = 1 mil Current stock price = $12 Number of shares issued per share outstanding = .10 Total number of warrants issued = 100,000 Exercise price of warrants = $10 Time to expiration of warrants = 4 years Annualized standard deviation of stock daily returns = .40 Rate of return = 10 percent United Glue Warrants United Glue Warrants United Glue Warrants United Glue Warrants United Glue Warrants United Glue Warrants What is a Convertible Bond? Amazon 4.75% Convertible 2009 Convertible into 6.41 shares Conversion ratio 6.41 Conversion price = 1000/6.41 = $156.05 Market price of shares = $120 Lower bound of value Bond value Conversion value = 6.41 x 120 = $768.00 What is a Convertible Bond? How bond value varies with firm value at maturity What is a Convertible Bond? How conversion value at maturity varies with firm value What is a Convertible Bond? How value of convertible at maturity varies with firm value 23- * McGraw Hill/Irwin Copyright ? 2003 by The McGraw-Hill Companies, Inc. All rights reserved Warrants and Convertibles Principles of Corporate Finance Seventh Edition Richard A. Brealey Stewart C. Myers Chapter 23 McGraw Hill/Irwin Copyright ? 2003 by The McGraw-Hill Companies, Inc. All rights reserved Example: BJ Services warrants, April 2000 Exercise price $ 15 Warrant Value $110 Share price $ 70 BJ Services share price 15 Warrant price at maturity Value of warrant Exercise price = $15 Actual warrant value prior to expiration Theoretical value (warrant lower limit) Stock price United glue has just issued $2 million package of debt and warrants. Using the following data, calculate the warrant value. United glue has just issued $2 million packag