Question
The Stambaugh Corporation currently has earnings per share of $10.60. The company has no growth and pays out all earnings as dividends. It has a
The Stambaugh Corporation currently has earnings per share of $10.60. The company has no growth and pays out all earnings as dividends. It has a new project that will require an investment of $3.15 per share in one year. The project is only a two-year project, and it will increase earnings in the two years following the investment by $3.95 and $4.25, respectively. Investors require a return of 14 percent on Stambaugh stock. |
b. | If the company does undertake the investment, what is the value per share now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
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