Icarus Air has one million shares outstanding and expects to earn a constant $10 million per year
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Icarus Air has one million shares outstanding and expects to earn a constant $10 million per year on its existing assets. All earnings will be paid out as dividends. Suppose that next year Icarus plans to double in size by issuing an additional one million shares at $100 a share. Everything will be the same as before but twice as big. Thus from year 2 onward the company earns a constant $20 million, all of which is paid out as dividends on the 20 million shares. What is the value of the company? What is the value of each existing Icarus Air share?
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Related Book For 
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
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