HomeDepot expects net cash flows of $50,000 by the end of this year. Net cash flows will grow 3.00 % if the firm makes no new investments. The president of the firm has the opportunity to add a line of kitchen and bathroom cabinets to the business. The immediate outlay for this opportunity is $100,000 and the net cash flows from the line will begin one year from now. The cabinet business will generate $32,000 in additional net cash flows. These net cash flows will also grow at 3.00 %. The firms discount rate is 15.00 %, and 200,000 shares of HomeDepot stock are outstanding.

a. What is the price per share of HomeDepot stock without the cabinet line?

b. What is the value of the growth opportunities that the cabinet line offers?

c. Once HomeDepot adds the cabinet line, what is the price of HomeDepot stock?