Question
WinSome Inc. has two million shares outstanding and its current assets generate earnings of $2M forever, including the current year. The company wants to
WinSome Inc. has two million shares outstanding and its current assets generate earnings of $2M forever, including the current year. The company wants to launch a new product this year, which will cost $1M initially and generate earnings of $0.5M forever. The firm pays out all its cash, except when it needs to use funds for investment. The cost of capital is 15%. 3. 2 10 1 $2M $2M... Earnings from current $2M $2M assets Earnings from project $1M $0.5M $0.5M $0.5M... $2.5M Total Payout $2.5M... $1M $2.5M a) What is the stock price of WinSome today (at year 0)?
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