A business has 10 million ordinary shares that are currently quoted at 2.20 each. The business has 1 million of cash available that it could use to fund a dividend. There is a project that will require an immediate cash outlay of 1 million and has a net present value of 0.5 million.

Assuming that the Stock Exchange is frictionless and price efficient, what will be the total value of the business's ordinary shares, if the business immediately pays a dividend of 0.10 per share and raises the finance for the project from an issue of equity capital?

A

20.00 million

(B) 16.25 million

c

22.00 million

D

22.50 million