The expected additional earnings due to the new facility is

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Stephens Corporation is thinking about constructing a new facility. The company has usually distributed its earnings in the form of dividends. Common stock has typically been issued to finance capital expansion. Preferred stock and debt are not in the capital structure.

The company's expectations follow:

Net income

$18,000,000

Outstanding shares

2,000,000

Construction cost of new facility

$10,000,000

The expected additional earnings due to the new facility is $2 million. The expected stockholder rate of return is 16 percent per annum. What is the total market value of the company, assuming the facility is financed with common stock?

Reference no: EM13484562

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