The capital structure of Whitefield Mills, Inc., is as follows:
Long-term debt .................. $250 million
Common stock, $1 par .............. 25 million
Contributed capital in excess of par value ....... 150 million
Retained earnings ................. 350 million
Total capitalization ............... $775 million
The company has decided to raise additional capital by selling $75 million of 8 percent debentures with warrants attached. Each $1,000 debenture will have 25 warrants attached, and each warrant will entitle the holder to purchase one share of common stock at $30.
a. Show the company's new capital structure after the sale of debentures and the exercise of all the warrants. Assume that no other changes in capital structure occur between now and the time the warrants are exercised.
b. What condition is necessary for the warrants to be exercised?
c. How much total money will the company raise as a result of this security issue, if all warrants are exercised?