Problem:
Genoa ltd is about to start a new project that will have a Net Present Value of $100 million. The stock currently trades at $105 and there are 2,000,000 shares outstanding. In order to start the project the company needs to raise $400,000,000 in new equity, by issuing 3,000,000 new shares that will be ordered to the public.
Required:
Question: What will be the stock price after the announcement that the company will immediately undertake such project and issue new equity? (Assume perfect markets and no issuance costs)
Note: Provide support for your underlying principle.