Answer:
Extra shares required is 1,314,975
Explanation:
Outstanding shares of a firm are those shares that have already been issued to the general public and finds have been received by the company in exchange.
Current price per share = (Total value of shares ÷ Number of shares) ÷ Discount rate
Current price per share= (400,000 ÷ 250,000) ÷ 0.16
Current price per share= $10
Value of firm with project= Initial cost + {(Value of outstanding stock + Annual Perpetual cash flow) ÷ Discount rate}
Value of firm with project= -350,000+ {(400,000+ 60,000)÷0.16}
Value of firm with project= $2,525,000
New price per share= 2,525,000 ÷ 250,000= $10.10
Extra amount needed for project= 2,525,000 - 400,000= 2,152,000
Extra shares required= (2,152,000 ÷ $10.10)÷ 0.16
Extra shares required= 1,314,975
