A company’s capital structure consists of 5 million shares of common stock and zero coupon bonds with a par (or face) va

[answerhappygod]

A company’s capital structure consists of 5 million shares of
common stock and zero coupon bonds with a par (or face) value of
$30 million that matures in nine months. The firm just announced
that it will issue warrants with an exercise price of $90 and nine
months until expiration to raise the funds to pay off its maturing
debt. Each warrant gives its owner the right to buy a single newly
issued share of common stock and can be exercised only at
expiration. The firm will place the proceeds from the warrant
issued immediately into Treasury bills. The firm will have assets
worth $400 million after the announcement. The company does not pay
dividends. The standard deviation of the returns on the firm’s
assets is 40 percent, and Treasury bills with a nine-month maturity
yield 5 percent. How many warrants must the firm issue today to be
able to use the proceeds from the sale to pay off the firm’s debt
obligation in nine months?