Stock price assuming no investment opportunities

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Reference no: EM131870862

Hyper Co. will generate $5 million earnings per year that last forever. There are 200,000 shares of stock outstanding. One year from now Hyper Co. will have two investment opportunities. The first one requires Hyper to spend $3 million on a new product and the new product will increase earnings in every subsequent year by $500,000. The second one requires the company to spend $2 million that will increase earnings in every subsequent year by $300,000. The discount rate is 10%.

1) What is the stock price assuming no investment opportunities?

2) What is the stock price when Hyper has these two opportunities?

Reference no: EM131870862

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