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A company is considering issuing additional shares of common stock to finance a new project. The companys current capital structure consists of 60% debt and
A company is considering issuing additional shares of common stock to finance a new project. The companys current capital structure consists of 60% debt and 40% equity, and its cost of equity is 12%. The company expects the new project to generate cash flows of $ 10 million per year for the next 10 years. If the company issues 1 million new shares of common stock at a price of $50 per share, what will be the impact on the companys earnings per share (EPS) and stock price, and how will it affect the value of the company. Explain fully.
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