Bruin Inc. will have earnings of $15 million next year and is projected to grow at a constant rate of 6 percent forever. All earnings are paid out as dividends to shareholders.
The company plans to launch a new project two years from now that will cost $10 million. The project will increase the firm's annual earnings by a constant $8.3 million every year forever starting one year later (i.e. 3 years from now).
What is the market value of the company stock? The discount rate is 16.3 percent.
a. $176 million
b. $30 million
c. $122 million
d. $187 million
e. $65 million