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Superior Clamps, Inc., has a capital structure consisting of 8.6million shares of common stock and 916,000 warrants. Each warrantgives its owner the right to purchase one share of newly issuedcommon stock for an exercise price of $22.50. The warrants areEuropean and will expire one year from today. The market value ofthe company's assets is $171.5 million and the annual variance ofthe returns on the firm's assets is .30. Treasury bills that maturein one year yield a continuously compounded interest rate of 8.6percent. The company does not pay a dividend. Use the Black-Scholesmodel to determine the value of a single warrant.
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