A fiRm Has 100 Shares of Equity and 40 Warrants

question 8

Multiple Choice

A firm has 100 shares of equity and 40 warrants outstanding.The warrants are about to expire, and all of them will be exercised.The market value of the firm's assets is €2,000, and the firm has no
Debt.Each warrant gives the owner the right to buy 2 shares at €15 per share.What is the price per
Share of the equity?

• A)€11.11
• B)€15.00
• C)€17.78
• D)€20.00
• E)None of the above.

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Definitions:

Compensation

Payments or benefits provided to employees in exchange for their services or to cover losses or damages.

Managerial Economics

An academic discipline that applies microeconomic theory and quantitative methods to solve business decision problems.

Agency Costs

are expenditures or losses incurred from the conflict of interest between principals (owners/shareholders) and agents (managers).

Imperfections

Flaws, faults, or defects that prevent something from being perfect or completely correct.