The Empire Inc. is an all-equity firm. It expects perpetual earnings before interest and taxes (EBIT) of $80 million per year. Its equity required return is 12%. The firm is subject to a 25% tax rate and has 10 million shares outstanding.

a. What is the value of Empire? What is its share price?

b. Empire has an opportunity at an expansion project. The project will require $150 million investment and will generate $40 million pre-tax perpetual annual cash flow. What is Empire Inc. value and share price if it accepts the project and finances it with new equity only?

c. Empire can borrow any amount at 10.0%. What is Empire value and share price, if it finances the project with debt?