A business has 10 million ordinary shares that are currently quoted at £2.20 each. The business has £1 million of cash available that it could use to fund a dividend. There is a project that will require an immediate cash outlay of £1 million and has a net present value of £0.5 million. Assuming that the Stock Exchange is frictionless and price efficient, what will be the total value of the business's ordinary shares, if the business immediately pays a dividend of £0.10 per share and raises the finance for the project from an issue of equity capital? B £20.00 million £16.25 million £22.00 million £22.50 million

A business has 10 million ordinary shares that are currently quoted at £2.20 each. The business has £1 million of cash available that it could use to fund a dividend. There is a project that will require an immediate cash outlay of £1 million and has a net present value of £0.5 million. Assuming that the Stock Exchange is frictionless and price efficient, what will be the total value of the business's ordinary shares, if the business immediately pays a dividend of £0.10 per share and raises the finance for the project from an issue of equity capital? B £20.00 million £16.25 million £22.00 million £22.50 million

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 5P

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