【正文】 ong, Inc.. ? Suppose that Mr. Armstrong decides to sell Mr. Mercx a call option issued on Mr. Armstrong’s share. The call gives Mr. Mercx the option to buy Mr. Armstong’s share for $1,500. ? If this call finishes inthemoney, Mr. Mercx will exercise, Mr. Armstrong will tender his share. ? Nothing will change for the firm except the names of the shareholders. 247 Dilution Example ? Suppose that Mr. Armstrong and Mr. LeMond meet as the board of directors of LegStrong. The board decides to sell Mr. Mercx a warrant. The warrant gives Mr. Mercx the option to buy one share for $1,500. ? Suppose the warrant finishes inthemoney, (gold increased to $350 per ounce). Mr. Mercx will exercise. The firm will print up one new share. 248 Dilution Example ?The balance sheet of LegStrong Inc. would change in the following way: Balance Sheet Before (Book Value) 0 $3,000 $3,000 Total $3,000 Total Assets $3,000 Debt Equity (2 shares) Gold: Liabilities and Equity Assets 249 Dilution Example Note that Mr. Armstrong’s claim falls in value from $1,750 = $3,500 247。Note that when n = the number of shares, share price is: p r i c e e x e r c i s ed e b t ofn e t v a l u esFi r m 39。e x e r c i s ew a r r a n t a f t e rp r i c e s h a r e??????????????2413 Warrant Pricing and the BlackScholes Model p r i c e e x e r c i s e p r i c e e x e r c i s ed e b t ofn e t v a l u esFi r m 39。 ?? ??wwThe gain from exercising a warrant can be written as: p r i c e e x e r c i s e d e b t ofn e t v a l u esFi r m 39。 ?nThus, the gain from exercising a call can be written as: 2412 Warrant Pricing and the BlackScholes Model p r i c e e x e r c i s e p r i c e e x e r c i s ed e b t ofn e t v a l u esFi r m 39。 2 to $1, = $5,000 247。Warrants and Convertibles Chapter 24 Copyright 169。 3 Balance Sheet Before (Market Value) 0 $5,000 $3,500