JRN Enterprises just announced that it plans to cut its dividend from $2.50 to $
ID: 2683907 • Letter: J
Question
JRN Enterprises just announced that it plans to cut its dividend from $2.50 to $1.50 per share and use the extra funds to expand its operations. Prior to this announcement, JRN's dividends were expected to grow at 4% per year and JRN's stock was trading at $25.00 per share. With the new expansion, JRN's dividends are expected to grow at 8% per year indefinitely. Assuming that JRN's risk is unchanged by the expansion, the value of a share of JRN after the announcement is closest to:Question 6 options:
A)
$25.00
B)
$15.00
C)
$31.25
D)
$27.50
Explanation / Answer
Given:
Calculate Coupon Payment:
Final Answer:
Check Your Answer if Equals Original PV of bond:
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