Question
Erwin Enterprises has 8.00 million shares outstanding with a current market price of $12.00 per share. There is one investment available to Erwin, and its
Erwin Enterprises has 8.00 million shares outstanding with a current market price of $12.00 per share. There is one investment available to Erwin, and its cash flows are provided below. Erwin has a cost of capital of 11.00 percent. Given this information, determine the impact on Erwins stock price and firm value if capital markets fully reflect the value of undertaking the project.
Initial cash outflow = $15,000,000.00
| Year | Cash Inflow |
|---|---|
| 1 | $2,037,202.00 |
| 2 | $4,275,808.00 |
| 3 | $5,241,756.00 |
| 4 | $6,099,732.00 |
| 5 | $7,034,871.00 |
| 6 | $1,389,679.00 |
What will be the new price of Erwin stock?
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Fixed Income Finance A Quantitative Approach
Authors: Mark Wise, Vineer Bhansali
1st Edition
0071621202, 978-0071621205
