A Firm Has Outstanding Warrants That Are Exercisable at $53

question 30

Multiple Choice

A firm has outstanding warrants that are exercisable at $53 per share and entitle holders topurchase two shares of common stock. The common stock is currently selling for $55 per share. Thetheoretical value of the warrant is ___________ .

• A) $1
• B) $3
• C) $2
• D) $4

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Definitions:

Owner's Equity

The total value of assets owned by the proprietorship after all debts and liabilities have been settled; essentially the net worth of a company.

Liabilities

Financial obligations or debts owed by a business to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.

Assets

Assets are possessions or property that a company owns or controls, anticipated to yield benefits in the future.

Claims

Demands for payment or entitlements to compensation for loss, damage, or injury; often encountered in insurance and legal contexts.