What is the subscription price for a new share

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a) LBC is considering a new project. The cost of the project is $1,121,956 and is expected to earn after-tax profits of $106,882 per year forever. LBC has a total value of $63 million and has outstanding debt of $41 million. LBC's tax rate is 32%. What is the NPV of the project if LBC has cost of debt of 7.9% and cost equity of 9.8%?

b) ABC currently has 14,503 shares outstanding and plans to have rights offering to raise $393,749. The ex-rights price of the stock is $21.90, and the rights-on price is $26.69. What is the subscription price for a new share?

Reference no: EM133003546

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