Warranty expense question
Question # 00004749 Posted By: Updated on: 12/06/2013 12:13 AM Due on: 12/31/2013
A company will issue 20-year bonds with annual interest payments. Each bond will include 30 warrants that give the holder to purchase one share of stock per warrant. Each warrant is expected to have a value of $5.75. A similar straight-debt issue would require an 8% coupon. What coupon rate should be set on the bonds with warrants so that the package will sell for $1,000?