California Electronics, Inc., expects to earn $95 million per year in perpetuity if it does not undertake any new projects. The firm has an opportunity that requires an investment of $15 million today, $4 million in one year, and $2 million in two years. The new investment will begin to generate additional annual earnings of $11 million four years from today in perpetuity. The firm has 20 million shares of common stock outstanding, and the required rate of return on the stock is 12 percent.

1) What is the price of a share of the stock if the firm does not undertake the new project?

2) What is the value of the growth opportunity resulting from the new project?

3) What is the price of a share of the stock if the firm undertakes the new project?