Cooperton Mining just announced it will cut its dividend from $3.79 to $2.44 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.1% rate, and its share price was $48.53. With the planned expansion, Cooperton's dividends are expected to grow at a 4.6% 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?

Cooperton Mining just announced it will cut its dividend from $3.79 to $2.44 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.1% rate, and its share price was $48.53. With the planned expansion, Cooperton's dividends are expected to grow at a 4.6% 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?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 5P

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