stocks valuation, Finance Basics

Supersoftware, Inc. earns a total of $200 million each year to pay out to their 20 million shareholders. They are in a very competitive business and have found it a struggle to come up with new ideas. They have however just uncovered a new innovation that will involve a one-time investment one year from now (t = 1) of $120 million for a system upgrade that will increase their cash flows by 50 million per year starting the following year (t = 2) in perpetuity. If Supersoftware''s cost of equity capital (the discount rate for equity) is 11%, by how much will this new idea change their price per share? (Enter just the number without the $ sign or a comma, round off decimals.)
Posted Date: 3/19/2013 12:20:25 AM | Location :







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