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The Stambaugh Corporation currently has earnings per share of $10.40. The company has no growth and pays out all earnings as dividends. It has a new project that will require an investment of $2.95 per share in one year. The project is only a two-year project, and it will increase earnings in the two years following the investment by $3.75 and $4.05, respectively. Investors require a return of 13 percent on Stambaugh stock. a. What is the value per share of the company’s stock assuming the firm does not undertake the investment opportunity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value per share $ b. If the company does undertake the investment, what is the value per share now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value per share $ c. The company undertakes the investment. What will the price per share be four years from today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price per share $

Financial Management, Finance

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