Net Present Value
Not what you're looking for?
Question: You are the CEO of Value-Added industries, Inc (VAI). Your firm has 10,000 shares of common stock outstanding, and the current price of the stock is $100 per share. There is no debt; thus, the "market value" balance sheet of VAI appears as follows:
VAI market Value Balance Sheet
ASSETS 1,000,000 Equity 1,000,000
You then discover an opportunity to invest in a new project that produces positive net cash flows with a present value of $210,000. Your initial costs for investing and developing the project are only $110,00. You will raise the necessary capital for this
A) What is the net present value of this project?
B) How many shares of common stock must be issued, and at what price, to raise the required capital?
C) What is the effect, if any, of this new project on the value of the stock of the existing shareholders?
Please answer the question and show the work on excel.
Thank you
Purchase this Solution
Solution Summary
Calculates the Net Present Value of a project and the effect that the project has on the share price.
Solution Preview
Please see attached file
You are the CEO of Value-Added industries, Inc (VAI). Your firm has 10,000 shares of common stock outstanding, and the current price of the stock is $100 per share. There is no debt; thus, the "market value" balance sheet of VAI appears as follows:
VAI market Value Balance Sheet
ASSETS 1,000,000 Equity 1,000,000
You then discover an opportunity to invest in a new project that produces positive net cash flows with a ...
Purchase this Solution
Free BrainMass Quizzes
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce