DEF just issued $16 million worth of 20 year, 8% bonds with warrants attached. Each bond has 50 warrants attached, and each warrant allows its owner to purchase one share of common stock. The warrants mature in 3 years and carry an exercise price of $105. Suppose that a bond-with-warrants package was issued at par when the yield to maturity was 10%. DEF's total value of operations and investments is $500 million and the firm currently has 5 million shares outstanding. The company's value is expected to grow at a 9% rate for the forseeable future. DEF is in the 35% tax bracket.
Find the warrant premium.
Find the expected share price when the warrants expire. Express all cash values in your intermediate calculations in terms of millions and round all your intermediate steps to four decimals.