Sharp Innovations Has Warrants Outstanding and Each Entitles the Holder

question 25

Multiple Choice

Sharp Innovations has warrants outstanding and each entitles the holder to purchase 1 share of common stock at an exercise price of $14 a share. If the current market price of the warrant is $9 and the common stock price is $22, what is the premium over the formula value for the warrants?

• A) $1
• B) $5
• C) $8
• D) $2

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Definitions:

Cash Dividends

Disbursements from a corporation's earnings made to its shareholders, often as a share of profits.

Common Stock

A type of equity security that represents ownership in a corporation, with holders typically having voting rights and potentially receiving dividends.

Balance Sheet

An exposition on a company's assets, its financial responsibilities, and the equity owned by shareholders, documented at a fixed point in time.

Total Revenue

The overall amount of money generated by a company from its business activities, before any expenses are subtracted.