How much will this new idea change their price per share

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Reference no: EM131012061

Super software, 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 Super software'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. (Enter just the number in dollars without the $ sign or a comma and round off decimals to the closest integer, i.e., rounding $30.49 down to $30 and rounding $30.50 up to $31.)

Reference no: EM131012061

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