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Determine the market price per share after the split

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Reference no: EM133061808

Question: (a) A project has an unlevered Net Present Value (NPV) of RM1.5 million. To finance the project, debt is being issued with associated flotation costs of RM60,000. The flotation costs can be amortized over the project's 5-year life. The debt of RM10 million is being issued at the market interest rate of 10 percent paid annually, with principal repaid in a lump sum at the end of the fifth year. If the firm's tax rate is 21 percent, compute the project's APV (Adjusted Present Value).

(b) Deep Water Drilling has 160,000 shares of stock outstanding at a market price of RM109 a share. The company has just announced a 7-for-3 stock split. Determine the market price per share after the split.

Reference no: EM133061808

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