Star Corp has 5 million shares outstanding and no growth opportunities. It just paid a dividend of $6 per share and has a market value of $62.5 million.

a. What is the discount rate on Stars stock?

b. The firm has an opportunity to invest in a new project. The project requires an additional investment of $1.2 million today and will generate additional earnings in the next 10 years. The first earnings amount of $0.3 million will begin one year from now and grow at 4% each year thereafter (until year 10). Assuming no taxes, calculate the NPV of the new project.

c. What will the stock price be if the firm undertakes the new project?