1. Which of the following is an example of an internal use of financial statements?
A. Managements useof them as a tool for planning for the future and estimating future cash flows
B. Creditors us of them to determine if the firm should be extended a line of credit
C. Suppliers use of them to ensure firm longevity
D. Stockholders useof them to evaliate if the stock is overvalued or undervalued
2. Masco is issuing new 15-year bond that comes with 40 warrants that allow the holder to buy a share of stock for $35. If there weren’t any warrants, the bonds would carry a 9% interest rate. However, with the warrants the bonds will pay a 7% annual coupon and can still be issued at the par value of $1,000. What is the value of each warrant?
a) $3.78 b) $4.03 c) $4.61 d) $5.17