What is the price of the firm stock

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XYZ corporation is completely owned by equity holders. It has 100 outstanding common shares. The stock is priced "fairly" at $20 per share. The CFO has chosen the best investment projects, which bring the firm a return of $3000 at t1.

Problem (a) What is the firm's cost of capital?

Problem (b) What is the price of the firm's stock at t1? At t1, the firm is not liquidated, because the CFO finds another profitable investment project. This new investment project can bring the firm a return of $5000 at t2.

Reference no: EM132791498

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