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The price of ALPHA share today is 4 dollars. ALPHA has no debt and 100,000 shares. Suppose that tomorrow information becomes available that ALPHA has
The price of ALPHA share today is 4 dollars. ALPHA has no debt and 100,000 shares. Suppose that tomorrow information becomes available that ALPHA has a project, which requires investment of 1000,000 dollars. This project produces 200,000 dollars per year for the next 10 years. The cost of capital for this project is 10% per year.
Question: once the information about the new project is available, what is the share price (on the 2nd day)?
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