Warrant Calculation. Check my work please.

[Laxputs]

Is this right or am I way off...

 

Warrant price today = .2

Exercise price = 1

Time until expiration = 1 year

Current Stock price = .75

Estimated Value of Stock in 1 year = 2$.

 

2$-1$-.2 = .8

 

.2 ---> .8 over 1 year

 

IRR 300%

 

Is this correct? TIA

 

And in general most just sell the warrant on the open market rather than exercising them with the company?

 

[no_free_lunch]

It's .2->1 so your IRR is 400%.

[Laxputs]

Isn't my return impacted by how much I spent on the warrants originally? .2.

[Mephistopheles]

Yes, and that's your cost basis (.2). The $1 what it should be worth in a year. You are double counting the .2 by also subtracting it from the $1.

 

This is just like calculating the return for a stock; what's it worth now, what's it worth when you sell, and how much time has passed.

[Laxputs]

Ah, of course. Thanks, fellas.