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ValuingManagementOptionsorWarrantswhenthereisdilution
Thisprogramisdesignedtovalueoptions,theexerciseofwhichcancreatemoresharesandthusaffectthestockprice.Thisisthecase
withwarrantsandmanagementoptions.Itisalsothecasewithconvertiblebonds.Asageneralrule,usinganunadjusted
optionpricingmodeltovaluetheseoptionswilloverstatetheirvalue.
Note:Beforeyourunthisprogram,checkunderpreferences(undertools),andcalculations,andensurethatthereisacheckagainsttheiteration
box.Youwillgetacircularreasoningwarning,butthisprogramneedscircularreasoningtocomputetheoptionvalue.
Enterthecurrentstockprice=
Enterthestrikepriceontheoption=
Entertheexpirationoftheoption=
Enterthestandarddeviationinstockprices=
Entertheannualizeddividendyieldonstock=
Enterthetreasurybondrate=
Enterthenumberofwarrants(options)outstanding=
Enterthenumberofsharesoutstanding=
10
10
5
40.00% (volatility)
0.00%
2.00%
100
1000
VALUINGWARRANTSWHENTHEREISDILUTION
10 #Warrantsissued=
StockPrice=
10 #Sharesoutstanding=
StrikePrice=
9.3964544178 T.Bondrate=
AdjustedS=
10 Variance=
AdjustedK=
5 Annualizeddividendyield=
Expiration(inyears)=
Div.Adj.interestrate=
d1=
N(d1)=
0.4894164087
0.6877265393
d2=
N(d2)=
0.4050108164
0.3427347801
100
1,000
2.00%
0.1600
0.00%
2.00%
Valueofthecall=
$3.36
sdilution
Thisisthecase
heckagainsttheiteration