The Jenkins Co. is considering a project which requires the purchase of $315,000 of fixed assets. The net present value of the project is $20,000. Equity shares will be issued as the sole means of financing the project. The price-earnings ratio of the project equals that of the existing firm. What will the new market value per share be after the project is implemented given the following current information on the firm?

Number of shares outstanding 50,000

Book value $500,000

Market value $720,000

Net Income $45,000

Return on equity 0.09

price-earnings ratio 16

earnings per share $0.90

Answer rating: 100% (QA)

To calculate the new market value per share after implementing the project we can use the priceearni... View the full answer