Question

Currently a firm has an operating cash flow of $350 million and there is a promising project available, which costs $200 million. There are 100 million shares outstanding with a current price of $40 per share. The firm is expected to pay out a dividend of $2.50 per share to existing shareholders. It will raise the money needed through issuing new shares.
a. What amount of new proceeds is required?
b. What is the new share price? Hint: the firm’s equity market value is not changed.
c. How many new shares does the firm have to issue?



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  • CreatedFebruary 25, 2015
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