What is the price per share without the new machines

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McDonald's expects net cash flows of $50,000 by the end of this year. Net cash flows will grow 3% if the firm makes no new investments. The president of the firm has the opportunity to add a new line of ice cream machines to the business. The immediate outlay for this opportunity is $100,000 and the net cash flows from the machines will begin one year from now. The addition will generate $32,000 in additional net cash flows. These net cash flows will grow at 3%. The firm's discount rate is 15% and 200,000 share of McDonalds stock are outstanding.

What is the price per share without the new machines? What is the value of the growth opportunities that the machine venture brings? What is the stock price once McDonalds gets the new machines?

Reference no: EM132484784

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