Suppose an All-Equity Firm Has a Value of $10,000 and 100

question 175

Multiple Choice

Suppose an all-equity firm has a value of $10,000 and 100 shares outstanding. The firm has issued 25 warrants, each of which may be exchanged for one share. The warrants have an exercise price of $75. If the firm will be worth $9,800 in one period (before exercise) , what will the price of the shares be assuming the warrants are exercised?

• A) $88.20
• B) $91.60
• C) $93.40
• D) $96.00
• E) $98.40

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Definitions:

Investment Account

An account held at a financial institution that holds investments such as stocks, bonds, mutual funds, and other assets for the investor.

Subsidiary

A company controlled by another company, often referred to as its parent company, through ownership of more than half of its voting stock.

Initial Value Method

An accounting approach where an investment is recorded initially at cost, without adjusting for changes in market value over time.

Investment Account

A financial account that holds securities, stocks, bonds, and other investments for the benefit of an investor.