Falcon is considering a new product line. The current stock price without the new line is $25.75.

a) With the new line, Falcon expects to drop the dividend to $.90 per share for the next 3 years. After year 3, dividends will start to grow at 3% in perpetuity. The required return is 7%. Find the price with the new line.

b) Based only on price per share, should they develop the new line? Explain.