Firm Z has 500,000 outstanding shares and expects a net cash flow of 250,000 per year in perpetuity if it undertakes no new investments. The firm has the opportunity to invest in a new production line. The cost of the production line is 300,000. The new production line will generate 60,000 in each year following the investment. Firm Z has a 100 percent payout policy and dividends are paid at the end of each year. The firm's discount rate is 12 percent.

a)What is the current price per share of firm Z without the new production line?

b)What is the net present value of the new production line?

c)What will be the current price per share of firm Z if the new production line is introduced?

d)What is the net present value of the new production line if it generates 60,000 only for the next 10 years and zero there after?