The annual earnings of BouncingBall Tennis will be $5 a share in perpetuity if thefirm makes no new investments. BouncingBall has a one-time opportunity, occurring three years from now, to invest 25% of its earnings (at that time) into a new project.For each dollar invested, earnings increase by $0.40 in the subsequent year and then remain at this new level in perpetuity. Assume the firms discount rate is 14%.

(a) What is the price per share of BouncingBall Tennis stock today, without making the new investment?

(b) What is the price if the new investment is made?