Posted by: Pdfprep
Post Date: April 15, 2021
A company has:
• 10 million $1 ordinary shares in issue
• A current share price of $5.00 a share
• A WACC of 15%
The company holds $10 million in cash. No interest is earned on this cash.
It will invest this in a project with an expected NPV of $4 million.
In a semi-strong efficient stock market, which of the following is the most likely share price immediately after the announcement of the new investment?
A . $5.40
B . $6.40
C . $6.80
D . $5.30
Answer: A
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