In comparison to the issuance of a bond without warrant, the issuance of a bond with warrants will: A) Increase D/E B) Decrease Interest expenses C) Increase CFO D) Decrease ROE
D
yeah d
B
Two are the correct answers…
decrease ROE, warrants are equity
map1 Wrote: ------------------------------------------------------- > decrease ROE, warrants are equity Plus…also another one is correct… go on…
it will also decrease interest expenses because the market will require a lower rate of return on a bond with a warrant attached than on a straight bond
B
Correct answers are C and D
strange, if you issue with bonds with warrants attached IE is lower because the yield on the bonds will be lower
Then B has to be true because that’s why CFO is up.
but i suppose CFO would also be higher since interest expense is not being charged
D makes sense. Why C?
i think bonds with warrants have lower interest expense too edit: schweser says Bonds with warrants Versus conventional debt: Lower interest expense Higher operating cash flow Lower balance sheet liability
yup bonds with warrants will have lower interest expense as well.
Nice one… what do you think guys?
that means all are right, because then C would be correct as well lol
yes, C is also true, bonds with warrants are like bonds at discount, have higher CFO
Nope…because a bond with warrants usually is issued at discount… interest expenses are higher due to the bond discount