Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
Cooperton Mining just announced it will cut its dividend from
$4.06
to
$2.62
per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a
3.2%
rate, and its share price was
$48.05.
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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