Abc corporation is investing 500 million in production


ABC Corporation is investing $500 million in production facilities. The present value of all future cash flows is estimated to be $700 million. Assume that all cash flows are aftertax. ABC has 180 million outstanding shares with a current market price of $25 per share. Assume that this investment is new information, and is independent of other expectations about the company. a. What is the NPV of the new project? b. What is the market value of the company without the new project? c. What should be the new effect of the project on the value of the company? d. What should be the new effect of the project on the stock price?

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Financial Management: Abc corporation is investing 500 million in production
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