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Draw time line to understand what is going on

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Supersoftware, Inc. earns a total of $85 million each year to pay out to their 2 million shareholders. They are in a very competitive business and have found it a struggle to come up with new ideas. They have however just uncovered a new innovation that will involve a one-time investment one year from now (t = 1) of $115 million for a system upgrade, resulting in extra cash flows that will stay constant at $14 million per year starting the following year (t = 2) and lasting forever. If Supersoftware's cost of equity capital (the discount rate for equity) is 14.5%, by how much will this new idea change their price per share? Draw time line to understand what is going on.

Reference no: EM132042281

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