Cooperton Mining just announced it will cut its dividend from $4.19 to $2.51 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.3% rate, and its share price was $51.02. 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? The new price for Cooperton's stock will be $. (Round to the nearest cent.)
Cooperton Mining just announced it will cut its dividend from $4.19 to $2.51 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.3% rate, and its share price was $51.02. 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? The new price for Cooperton's stock will be $. (Round to the nearest cent.)
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 8P
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