Question
Galaxy Air, previously a no-growth firm, has two million shares outstanding. Until now, it consistently earned $20 million per year on its assets. (It has
Galaxy Air, previously a no-growth firm, has two million shares outstanding. Until now, it consistently earned $20 million per year on its assets. (It has no debt and pays out all earnings as dividends. Its cost of capital is 10%.) Due to its newly appointed CEO, Galaxy Air is now able to squeeze out 1% annual growth by plowing back 5% of earnings. Calculate its stock price per share.
A. $200.00
B. $106.61
C. $100.00
D. $110.10
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
