Question
Green Footwear had a current share price of $24.72, and the firm had 1,800,000 shares of stock outstanding. The CEO of the company is considering
Green Footwear had a current share price of $24.72, and the firm had 1,800,000 shares of stock outstanding. The CEO of the company is considering an investment project that he is confident will result in an NPV of $1,500,000. However, investors are pessimistic about the project's prospect and believe that the project would result in an NPV of -$900,000 instead. If the CEO decides to go ahead with the project and the negative NPV as expected by investors is realized, what would the new stock price be? (Hint: consider how the project NPV can create or destroy wealth of shareholders)
$25.50
$24.78
$26.17
$25.06
$24.22
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