Cooperton Mining just announced it will cut its dividend from $3.89 to $2.74 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.4% rate, and its share price was $50.36. With the planned expansion, Cooperton's dividends are expected to grow at a 4.5% rate. What share price would you expect after the announcement? (Assume that the new expansion does not change Cooperton's risk.) Is the expansion a good nvestment?
Cooperton Mining just announced it will cut its dividend from $3.89 to $2.74 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.4% rate, and its share price was $50.36. With the planned expansion, Cooperton's dividends are expected to grow at a 4.5% rate. What share price would you expect after the announcement? (Assume that the new expansion does not change Cooperton's risk.) Is the expansion a good nvestment?
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 8P
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Transcribed Image Text:Cooperton Mining just announced it will cut its dividend from $3.89 to $2.74 per share and use the extra funds to expand. Prior to the announcement, Cooperton's
dividends were expected to grow at a 3.4% rate, and its share price was $50.36. With the planned expansion, Cooperton's dividends are expected to grow at a 4.5%
rate. What share price would you expect after the announcement? (Assume that the new expansion does not change Cooperton's risk.) Is the expansion a good
investment?
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