How the project npv affects the stock price

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Reference no: EM131571513

Merrimack Inc., had a current share price of $50, and the firm had 1,000,000 shares of stock outstanding. The company is considering an investment project that requires an immediate $15,000,000 investment but will produce a single cash flow of $20,000,000 after 2 years then close. If Merrimack invests in the project, what would the new share price be? Merrimack's cost of capital is 10%. (Hint: consider how the project NPV affects the stock price)

a) $35

b) $42.75

c) $48.25

d) $51.53

e) $55

Reference no: EM131571513

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