The all equity firm ABC Corp has assets-in-place of 900 , of which 700 are in fixed,
Question:
The all equity firm ABC Corp has assets-in-place of 900 , of which 700 are in fixed, illiquid assets and 200 are in cash. In addition, ABC Corp has a growth opportunity (new investment) which requires 200 of initial investment and has an NPV of 100. The investment needs to be made within the next few days. At the same time, ABC is also deliberating whether to pay a dividend today. ABC has 100 shares outstanding. Note: Unless otherwise stated, assume that markets are perfect and complete. Assume also that firm and market fundamentals will not change over the next few days and that managers maximize shareholder value.
(a)What's the stock price now?
(b)What the stock price if pay divident of 2 per year?
(c)What's the stock price after investment?
(d)What's the debt and equity after investment?
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty