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Chapter 5: Q3BP (page 624)

The warrants of Integra Life Sciences allow the holder to buy a share of stock at \(11.75 and are selling for \)2.85. The stock price is currently $8.50. To what price must the stock go for the warrant purchaser to at least be assured of breaking even?

Short Answer

Expert verified

Answer

The stock price must go up to $14.60 for the warrant purchaser.

Step by step solution

01

Introduction of Stock price-

A stock price is a relative and proportional value of a company that will be the cost to buy one stock in a company. The stock price is not fixed and fluctuates as per the market conditions.

02

Computation of breakeven price-

Breakevenprice=Exerciseprice+Speculativepremium=$11.75+$2.85=$14.60

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Most popular questions from this chapter

The efficient market hypothesis is interpreted in a weak form, a semi strong form, and a strong form. How can we differentiate its various forms?

Question: The trustee in the bankruptcy settlement for Titanic Boat Co. lists the following book values and liquidation values for the assets of the corporation. Liabilities and stockholders’ claims are also shown.

Assets

Book value

Liquidation value

Accounts receivables

\(1,400,000

\)1,200,000

Inventory

\(1,800,000

\)900,000

Machinery and equipment

\(1,100,000

\)600,000

Building and plant

\(4,200,000

\)2,500,000

Total assets

\(8,500,000

\)5,200,000

Liabilities and stockholder’s claims

Liabilities

Accounts payable

\(2,800,000

First lien, secured by machinery and equipment

\)900,000

Senior unsecured debt

\(2,200,000

Subordinated debenture

\)1,700,000

Total liabilities

\(7,600,000

Stockholder’s claims

Preferred stock

\)250,000

Common stock

\(650,000

Total stockholder’s claims

\)900,000

Total liabilities and stockholder’s claims

$8,500,000

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