Answer to Question #61265 in Finance for Alex

Question

Your company wishes to raise a new debt capital on stock market. Your managing director has heard of warrants and traded options and suggests that an issue of debt, accompanied by either attached warrants or traded options might be attractive to investors and have benefits for your company.

Required:
Discuss whether you consider your managing director’s suggestions to be useful. (10 Marks)

Answer 1

If your company wishes to raise a new debt capital on stock market and your managing director suggests that an issue of debt, accompanied by either attached warrants or traded options might be attractive to investors and have benefits for your company, then we can consider your managing director’s suggestions to be useful, but the risks of such decision may be high enough, because the debt ratio will rise and the company will also need to repay the debt paying also the interest.