1. Folic Acid Inc. has $24 million in earnings, pays $3.4 million in interest to bondholders, and $2.2 million in dividends to preferred stockholders. What are the common stockholders’ residual claims to earnings?
2. For a company without financial distress, list the different costs of capital from least expensive to most expensive and explain.
3. Preston Toy Co. has warrants outstanding that allow the holder to purchase a share of stock for $19 (exercise price). The common stock is currently selling for $25, while the warrant is selling for $8.75 per share. a. What is the intrinsic (minimum) value of this warrant? b. What is the speculative premium on this warrant?