Kinston Industries just announced that it will cut its dividend from $3.00 to $2.00 and use the extra funds to expand its operations. Kinston's dividends were expected to grow at a 2% rate, and its share price was $37.50. With the new expansion, Kinston dividends are expected to grow at a 5% rate. Kinston's share price following this announcement should be? per share

Kinston Industries just announced that it will cut its dividend from $3.00 to $2.00 and use the extra funds to expand its operations. Kinston's dividends were expected to grow at a 2% rate, and its share price was $37.50. With the new expansion, Kinston dividends are expected to grow at a 5% rate. Kinston's share price following this announcement should be? per share

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Cooperton Mining just announced it will cut its dividend from $3.82to $2.45 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 $48.02. With the planned expansion, Cooperton's dividends are expected to grow at a 4.7% rate. 1. What share price would you expect after the announcement? (Assume that the new expansion does not change Cooperton's risk.) 2. Is the expansion a good investment?
Cooperton Mining just announced it will cut its dividend from $4.17 to $2.47 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.5% rate, and its share price was $50.23. With the planned expansion, Cooperton's dividends are expected to grow at a 4.9% 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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