Principles of Corporate Finance

Example - Macbeth Spot Removers - All Equity Financed

Return on shares (%) 5 % 10 15 20

Earnings per share $.50 1.00 1.50 2.00

Operating Income $500 1,000 1,500 2,000

A B C D

Outcomes

Market Value of Shares $ 10,000

Price per share $10

Number of shares 1,000

Data

M&M (Debt Policy Doesn’t Matter)

Expected

outcome