corporate finance

Project Description:

norway x-country skis inc. (today) expects to earn $5.00per share for each of the future operating periods (beginning at time 1) if the firm makes no new investments and returns the earnings as dividends to the shareholders. however, clint williams, president and ceo, has discovered an opportunity to retain and invest 40% of the earnings, beginning 3 years from today. this opportunity to invest will continue for each period indefinitely. he expects to earn 14% on this new equity investment, the return begin¬ning 1 year after each investment is made. the firm's equity discount rate is 15% throughout.

• what is the price per share of norway x-country skis inc. stock without making the new investment?
• if the new investment is expected to be made, per the preceding information, what would the price of the stock be now?
• suppose the company could increase the investment in the project by whatever amount it chose. what would the retention ratio need to be to make this project attractive?
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Price Type: Negotiable

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