Cooperton Mining just announced it will cut its dividend from ($4.27) to ($2.67) per share and use

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Cooperton Mining just announced it will cut its dividend from \($4.27\) to \($2.67\) per share and use the extra funds to expand. Prior to the announcement, Cooperton’s dividends were expected to grow at a 2.9% rate, and its share price was \($49.06.\) With the new expansion, Cooperton’s dividends are expected to grow at a 4.8% rate. What share price would you expect after the announcement? (Assume Cooperton’s risk is unchanged by the new expansion.) Is the expansion a positive NPV investment?

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Corporate Finance

ISBN: 9781292446318

6th Global Edition

Authors: Jonathan Berk, Peter DeMarzo

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