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What is the price of the stock of boston chicken

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Boston Chicken, Inc. has reported earnings of $8million. It is expected that earnings will grow at 3% each year in perpetuity if the firm undertakes no new investment opportunities. There are two million shares of common stock outstanding. The firm has a new project that needs an immediate investment of $3 million. The new project will produce annual earnings of $1.5 million in the subsequent 20 years. Stockholders of the firm require 12 percent return on the stock.

-What is the price of the stock if the firm does not undertake the new project?

-Is it worthwhile to undertake the new project?

-What is the price of the stock if the firm does undertake the new project?

Reference no: EM133068146

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