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Suppose that a company has earnings per share of $3 and it has 2 million shares outstanding. The company is going to undertake a project
Suppose that a company has earnings per share of $3 and it has 2 million shares outstanding. The company is going to undertake a project that will require an investment of $1 million now, and another $1.1 million 1 year from today. The project will start to provide cash inflows from the end of year 2. The cash inflow will be $600,000 at the end of year 2 and then it will grow at the rate of 4% per year. The required rate of return is 10%. What is the share price of the stock today? a. $30.00 b. $32.90 c. $33.68 d. $34.97
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