The following data apply to Saunders Corporation: Saunders Corporation currently

ID: 2778545 • Letter: T

Question

The following data apply to Saunders Corporation:

Saunders Corporation currently has 1,000,000 common stocks outstanding.

It considers raising $10 million through issuing 20-year 6.7% coupon bonds – annually paid - with 18 warrants.

Each bond has a face value of $1,000.

Each warrant gives the holder the right to purchase one share of stock.

The bonds will be sold at par.

Each warrant has a strike price of $24 and 10 years until expiration.

The interest rate of 20-year annual payment bond without warrants is 14.4%.

Assume the total value of Saunders Corporation right before the warrants will be exercised is $81 million

If you decide to exercise your warrants at Year 10. What is the total net payoff that you will receive from each warrant?

The following data apply to Saunders Corporation: Saunders Corporation currently

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