I dusted off my investment book and applied the Black Scholes formula to the CNAM warrants. The formula can be simplified if there is a very high probability that the warrants will be exercised within the term of the warrants which in this case is 5 years. If there is a 100% probability, the formula equals the: Current Stock Price - Present Value of the Exercise Price at the end of the Warrant Term. As I think that there is a high probability that the warrants will be exercised in 5 years, I think this approximation is okay to use.
Current Stock Price: $6.90 ( closing price prior to new issue) Exercise Price: $7.50 Term in Years: 5 Risk free rate (5 year Treasury rate): 2.5%
Formula: $6.90 - PV(7.50) at end of five year = $.27
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