With annual earnings of $32.5 million every year, Durango Data wasconfident that this amount of profit could be sustained indefinitely if itsimply maintained its current portfolio of assets and avoided any newprojects. But Durango is approached by a data warehouse technologycompany with an opportunity for Durango to invest $29 million today;and $45 million one year from now in a new product that requirestechnical development and regulatory approval. The new investment willgenerate annual after-tax cash flow of $17 million in perpetuity startingthree years from today. Durango has 14.0 million shares outstanding andthe required rate of return on the stock is 11%.What is the price of one Durango share (the share price stated as $ per share)if it continues "business as usual" and turns down the investment opportunity?$17.01$15.44$25.93$18.03$21.10

In order to determine the Earning per share, the total earning available to equity shareholders are…

Answered: With annual earnings of $32.5 million…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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aa
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