Fundamentals of Corporate Finance, Student Value Edition
Fundamentals of Corporate Finance, Student Value Edition
3rd Edition
ISBN: 9780133576863
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
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Chapter 10, Problem 6CQ

Suppose Nanovo announces the major expansion and the stock price reacts as in Question 5. Nanovo then issues new shares at this price to cover the up-front free cash flow required to launch the expansion, and thereafter pays out as dividends the total amount it expected to pay prior to the expansion, plus the additional free cash flow associated with the expansion. What dividend per share will Nanovo pay over the next eight years? What is the fair price today for Nanovo stock given these dividends?

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Fundamentals of Corporate Finance, Student Value Edition

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