The Mosley Wheat Company (MWC) has wheat fields that currently produce annual profits of $1,100,000....
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| The Mosley Wheat Company (MWC) has wheat fields that currently produce annual profits of $1,100,000. These fields are expected to produce average annual profits of $820,000 in real terms forever. MWC has no depreciable assets, so the annual cash flow is also $820,000. MWC is an all-equity firm with 385,000 shares outstanding. The appropriate discount rate for its stock is 16 percent. MWC has an investment opportunity with a gross present value of $1,900,000. The investment requires a $1,400,000 outlay now. MWC has no other investment opportunities. Assume all cash flows are received at the end of each year. What is the price per share of MWC? |
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