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Goal of maximizing shareholder wealth

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Basher Labs is considering expanding into the growing area of molecular cloning. Basher's current beta is 1.3. The beta is expected to increase to 1.50 after expansion. The long-term growth rate is expected to increase from 3 percent before expansion to 6 percent after expansion. Basher currently pays a dividend of $1.50 per share. The current risk-free rate is 7 percent. The historical (and projected) market risk premium is 8.6 percent. Consistent with the goal of maximizing shareholder wealth, should it undertake the expansion. Carefully explain why.

Reference no: EM133120313

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