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The Stambaugh Corporation currently has earnings per share of $11.20. The company has no growth and...

The Stambaugh Corporation currently has earnings per share of $11.20. The company has no growth and pays out all earnings as dividends. It has a new project that will require an investment of $3.75 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 $4.55 and $4.85, respectively. Investors require a return of 15 percent on Stambaugh stock.

  

b.

If the company does undertake the investment, what is the value per share now?
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Answer #1

P 2 Dividend-$1120- 74.6チ The Investment one time nvestnrent that Create an Increase in EPS for tuo years. calculate new Stoct price,we need the Cash cou pyíce plu NPvGO --$315 =ま3.37 P-37467+533チ $ 78.04 $4.95-l-S4, 85

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