Stand Still Co

question 27

Multiple Choice

Stand Still Co. has been earning $1 per share on 400,000 shares, and paying out all of the earnings. The discount rate for a company of this risk is 10%. The company has an investment opportunity with a cost of $1,500,000 and expects to earn $230,000 after taxes, but they must reinvest 35% of these earnings to continue to maintain the expansion in earnings. What is the value of the company without the investment and what is the value with the investment?

• A) $200,000; $1,500,000
• B) $4,000,000; $6,600,000
• C) $4,000,000; $3,995,000
• D) $400,000; $15,000,000

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Definitions:

Sympathetic Neurons

Nerve cells that are part of the sympathetic nervous system and involved in the body's involuntary responses to stress.

Propulsion

The act of driving or pushing forward, in biological contexts often referring to the movement of food through the digestive system.

Segmentation

The division of some animals and embryos into a series of repetitive segments, or a process of dividing data or objects into parts for analysis.

Accessory Organ

A supplementary organ that assists in the function of other organs within a system, such as the pancreas or gallbladder aiding in digestion.