2 The Board of Carlson has just announced that the company has achieved a breakthrough in its therapeutic drug technologies for some of the major forms of cancer. This medical advance, which it has patented, will give it a considerable competitive advantage in the market-place for many years to come.

The directors anticipate that this breakthrough will now enable the company to increase its dividend payments to shareholders by an additional 5 per cent per year indefinitely. At this stage, the investors’ required rate of return will remain unchanged.

Calculate the new share value and comment on the difference in share value between (1) and (2).