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Crane Company offered detachable 5-year warrants to buy one share of common stock (par value $5) at $20 (at a time when the stock was selling for $30). The price paid for 700, $1,000 bonds with the warrants attached was $810000. The market price of the Crane bonds without the warrants was $710000, and the market price of the warrants without the bonds was $71800. What amount should be allocated to the warrants

Respuesta :

Answer:

$ 74,389.87

Explanation:

It is given that :

The cost of 700, $1000 bonds with warrant attached to the bond = $810,000

The cost of Crane bonds with warrant = $710,000

The cost of market price of the warrants without bonds = $71,800

Therefore, the amount should be allocated to the warrants :

[tex]$=\frac{\$71,800}{\$71,800+\$710,000}\times \$ 810,000$[/tex]

[tex]$=\frac{\$71,800}{\$781,800}\times \$ 810,000$[/tex]

= $ 74,389.87

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