Burr Steerdrum Co has been achieving the following annual results.

The bonds have a market value at par, and the cost of equity is 19.6%. There are 1,000,000 shares in issue with current price of $2.50 per share.

The company is now considering a project costing $1,000,000 which would add to profits by $200,000 per annum in perpetuity before interest and tax. All earnings would continue to be paid as dividends.

The share price will respond immediately to any change in expected future dividends. Tax on profits will remain at 30%.

If the project is undertaken, financed entirely by new equity capital by issuing new shares (at the current market price), so that the cost of debt remains unchanged and the cost of equity in the company falls to 17%, the share price will: