Elite Cars (ELC) is a publicly traded automobile dealership having multiple showrooms across the country. You know the following about ELC: 

• All of ELC income currently comes from the sale/trading of automobiles. 

• ELC expects to generate a Free Cash Flow of $20 Million in the coming year (t=1) and expects this cash flow to grow by 5.6% each year forever. 

• ELC's current debt to equity ratio is 0.25 and its debt is risk free. 

• ELC has 10 million shares outstanding. 

• ELC currently has an equity beta of 1.5. ELC is currently (at t=0) contemplating adding service centre to each of its showrooms. 

Doing so would require an initial investment of $18 million. The new business is expected to generate free cash flow of $3 million a year from the coming year (t=1) and to grow at 3% forever thereafter. The $18 million investment will be financed by issuing risk-free debt. The risk associated with service operations is different from the risk of the dealership business. You have identified a major competitor of ELC, Fabulous Motors (FM). In addition to operating dealerships that buy and sell automobiles, FM also operates a service centre in each of its showrooms. FM is valued at $100 million and, its service centre business is valued at $25 million and its dealership business is valued at $75 million. FM's dealership business has the same asset beta as ELC's dealership business. FM has no debt and equity beta is equal to 1. Assume that the CAPM is a realistic model of the world. The expected return on the market is 12% and the risk-free rate is 4%. 

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a) (10 points) What is the expected return to ELC's equity and debt holders before consideration of the new venture? 

b) (10 points) Calculate the price per share of ELC before consideration of the new venture. 

c) (20 points) Calculate the discount rate appropriate for discounting ELC's expected free cash flows associated with opening services centers in all of its showrooms. 

d) (10 points) What will ELC's stock price be after considering the new service center business?