What is the total dollar present value of the investment

Assignment Help Financial Management

Reference no: EM131186495

Roscor Pharmaceuticals anticipates earnings of $539 million every year from now on if it simply maintains its current portfolio of assets and declines any new projects. But the firm is approached by an arthritis therapy company with an opportunity for Roscor to invest $35 million today; $175 million one year from now; and $55 million two years from now in a new product that requires technical development and FDA approval. The new investment will generate annual after-tax earnings of $68 million in perpetuity starting three years from today. Roscor has 150 million shares outstanding and the required rate of return on the stock is 11%.

a) What is the price of one Roscor share (the share price) if it continues “business as usual” and turns down the investment opportunity?

b) What is the total dollar present value of the investment?

c) What is the total dollar present value of the benefit of the new income stream?

d) What would Roscor’s new stock price be if it made the investment?

Reference no: EM131186495

Questions Cloud

Check out starbucks quite extensive sustainability efforts. : 1. check out Starbucks quite extensive sustainability efforts. Starbucks: Environmental Sustainability 2. Research sustainability efforts of Starbucks, human sustainability, environmental sustainability, another creative approach to sustainability th..

What is the projected dividend for the coming year : Momsen Corp. is experiencing rapid growth. Dividends are expected to grow at 30 percent per year during the next three years, 20 percent over the following year, and then 5 percent per year indefinitely. The required return on this stock is 12 percen..

Calculate the mask cost contribution to silicon area : Calculate the mask cost contribution to silicon area price if 0.25 μm CMOS with 25 photomasks at $3000 per mask plate is used and each mask set is used to fabricate 50/500/5000/50 000 wafers?

What is the cost of the finished silicon : The investment for a large-volume CMOS wafer fab was $1 billion (year 2000, 0.25 μm technology, 200 mm wafer size). Fab running costs are $1 million a day. Assuming 30 000 wafer starts per month (WPM), what is the cost of the finished silicon?

What is the total dollar present value of the investment : Roscor Pharmaceuticals anticipates earnings of $539 million every year from now on if it simply maintains its current portfolio of assets and declines any new projects. What is the total dollar present value of the investment? What would Roscor’s new..

Fully depreciated by the straight-line method : Flatte Restaurant is considering the purchase of a $10,500 soufflé maker. The soufflé maker has an economic life of four years and will be fully depreciated by the straight-line method. The machine will produce 2,250 soufflés per year, with each cost..

What is the expected capital gains yield : The next dividend payment by ECY, Inc., will be $1.60 per share. The dividends are anticipated to maintain a growth rate of 6 percent, forever. The stock currently sells for $30 per share. What is the dividend yield? What is the expected capital gain..

What is the yield if murphy''s model is used instead : What is the yield if Murphy's model is used instead? How about Seeds' model?

Market value weights or book value weights : Filer Manufacturing has 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value $70 million, a coupon of..

User Account

All Pages