question archive Walker Widgets, Inc
Walker Widgets, Inc
Subject:FinancePrice:2.87 Bought7
Walker Widgets, Inc. has 60,000 shares and 1,000 warrants outstanding. A warrant holder can purchase two new shares of stock for each warrant. The exercise price for the warrants is $20 per share. The stock is currently selling for $23 per share.
If the warrants are exercised, what will be your fraction of ownership if you owned 5000 shares originally. Assume you own none of the warrants.
If the warrants are exercised immediately, what would be the market price of the stock?
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Answer:
Total Value today = 60000*23 + 1000*2*20 = 1380000 + 40000 = 1420000
Now if the warrants are exercised then the total number of shares = 60000 + 1000*2 = 62000
Then the Fraction of ownership with 5000 shares = 5000 / 62000 = 5 / 62 = 8.06%
If the warrants are exercise immediately then the market value of share =
60000 * 23 + 1000 * 2 *20 = 1420000
then divide it by new number of shares that is 62000
Therefore MPS = 1420000 / 62000 = 22.903
