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2.

An all equity firm has two million shares outstanding. It is expected to earn a constant $20 million per year on its assets and will pay out all future earnings as dividends. If the cost of equity capital is 10%, what is the price of one firm's stock? Select one O a $200 O b. $150 OC $100 Od $50 Westgate company selects projects using the NPV approach but real options associated with projects have never been considered. Which of the following statements is most likely to describe its situation? Select one: . Failing to consider abandonment and flexibility options probably makes the optimal capital budget too large, but failing to consider growth and timing options probably makes the optimal capital budget too small, so it is unclear what impact not considering real options has on the overall capital budget O b. Its estimated capital budget is probably too small , because projects' NPVs are often larger when real options are taken into account. OC Real options should not have any effect on the size of the optimal capital budget. O d. Its estimated capital budget is probably too large due to its failure to consider abandonment and growth options