The Stambaugh Corporation currently has EPS of $8.25. The company has no growth and pays out all earnings as dividends. It has a new project that will require an investment of $1.60 per share in one year. The project is only a two- year project, and it will increase earnings in the two years following the investment by $2.10 and $2.45, respectively. Investors require a 12 percent return on Stambaugh stock.

a. What is the value per share of the company’s stock, assuming the firm does not undertake the investment opportunity?

b. If the firm does undertake the investment, what is the value per share now?

c. Again, assume the firm undertakes the investment. What will the price per share be four years from today?