Beetlejuice has 15 million shares outstanding with a current market price of $2 per share. Beetlejuice announces an investment in a project where the initial investment in year 0 is $5 million and the cash inflow for the next five years will be $3 million, after which the investment will generate no cash flows. Beetlejuice’s discount rate for this project is 8%. What is the dollar increase in Beetlejuice’s share price due to the undertaking this investment?
Beetlejuice has 15 million shares outstanding with a current market price of $2 per share. Beetlejuice announces an investment in a project where the initial investment in year 0 is $5 million and the cash inflow for the next five years will be $3 million, after which the investment will generate no cash flows. Beetlejuice’s discount rate for this project is 8%. What is the dollar increase in Beetlejuice’s share price due to the undertaking this investment?
Chapter23: Corporate Restructuring
Section: Chapter Questions
Problem 10P
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Beetlejuice has 15 million shares outstanding with a current market price of $2 per share.
Beetlejuice announces an investment in a project where the initial investment in year 0 is $5 million and the cash inflow for the next five years will be $3 million, after which the investment will generate no cash flows.
Beetlejuice’s discount rate for this project is 8%. What is the dollar increase in Beetlejuice’s share price due to the undertaking this investment?
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