Keiser University has warrants in the market that allows people who own it to be authorized...

Keiser University has warrants in the market that allows people who own it to be authorized to buy 1 share of the university at the price of $ 25.

a) Calculate the execution value of the organization's warrants if the common shares are sold each at the following prices: (1) $ 20, (2) $ 25, (3) $ 30), (4) $ 100. (The warrant's execution value is the difference between the price of the shares and the purchase price specified by the warrant if the authorization is executed.)

Expert Solution

Execution value of warrant = Stock price - warrant specified purchase price.
value cannot be negative. Minimum value can be zero only. In other words, If stock price is more than warrant specified price, then only warrant will be excercised. Warrant is an option to buy the share, so it is only excercised when stock price is more than warrant specified purchase price.

(1) Stock price =   20
warrant specified purchase price =   $25
Execution value = 20-25 =   0

(2) Stock price =   $25
Execution value = 25-25 =   $0

(3) Stock price =   $30
Execution value = 30-25 =   $5

(4) Stock price =   $100
Execution value = 100-25 =   $75

So execution value is $0, $0, $5 and $75 in respective cases.

jeff jeffy answered 4 months ago

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Keiser University has warrants in the market that allows people who own it to be authorized...

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