A firm has no debt. Existing assets generate earnings (E) of $35 million per year forever. Discount rate is 14%. Firm has 12.5 million shares (n). Now firm plans to invest I=$15 million in a new project. The new project will generate $14 million in new earnings forever per year.

Q7. If the firm issues the new shares at P* = 25 per share to finance the project, what is the expected return for new shareholders?

		14.96%
		16.18%
		12.94%
		13.44%
		14%