Supplementary Problem 1. Parts C,D, & E

Calculate the expected value of the share in the market today? b. You observe that the current market price for the company shares is $35.31. Calculate the expected return that investors are expecting now. c. Explain what happened. d. A new long term project is being considered by the company. However, the project will increase the risk associated with the company and the required rate of return will increase and investors will require a 15 percent rate of return on their investment. However, the new project will provide growth of 15 percent per year for the next 5 years and then growth will return to its normal rate of 2 percent. Should the company invest in this new project? e. Assuming the company takes on the project (even if you recommended that you don't take on the project in), calculate the rate of increase or decrease from the current stock price in the market for the company's common shares