ABC Company is planning to issue 20,000 bonds with warrants attached. The bonds will make...
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ABC Company is planning to issue 20,000 bonds with warrants attached. The bonds will make annual interest payments of 6.8% and will have a 20-year maturity. There will be 75 warrants attached to each bond, with each warrant giving the right to purchase one share of stock at a price of $12. A similar straight-debt issue would require a 10% coupon rate. Total assets before issuance equal $120 million, with $50 million of liabilities. What is the impact on ABCs balance sheet after the warrants are exercised assuming a par value of $1 per share of common stock?
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