# Present Value, Warrant

1. Ambrin Corp. expects to receive $2,000 per year for 10 years and $3,500 per year for the next 10 years. What is the present value of this cash flow? Use an 11% discount rate

2. The intrinsic value of a warrant to buy 5 share of Merton stock at $55 per share is $20. What is the current market price of Merton Stock?

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#### Solution Preview

Note:

PVIF= Present Value Interest Factor

PVIFA= Present Value Interest Factor for an Annuity

They can be read from tables or calculated using the following equations

PVIF( n, r%)= =1/(1+r%)^n

PVIFA( n, r%)= =[1-1/(1+r%)^n]/r%

1. Ambrin Corp. expects to receive $2,000 per year for 10 years and $3,500 per year for the next 10 years. What is the present value of this cash flow? Use an 11% discount ...

#### Solution Summary

Calculates present value of cash flow and current market price of Stock given the intrinsic value of a warrant.