(c) Spira plc. is considering an investment that requires the issuance of 75,000 new shares. It currently has earnings per share of 30 pence and this is not expected to change because of undertaking the new investment. A company in the same risk class has a price-to-earnings ratio of 8:1. What is the maximum amount of finance that Spira can raise from such an issue?
(c) Spira plc. is considering an investment that requires the issuance of 75,000 new shares. It currently has earnings per share of 30 pence and this is not expected to change because of undertaking the new investment. A company in the same risk class has a price-to-earnings ratio of 8:1. What is the maximum amount of finance that Spira can raise from such an issue?
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 6P
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