15) JRN Enterprises just announced that it plans to cut its dividend from $3.00 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 indefinitely at 4% per year and JRN's stock was trading at $25.50 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 A) $12.75 B) $38.63 C) $19.32 D) $25.50 16) Gremlin Industries will pay a dividend of $1.90 per share this year. It is expected that this dividend will grow by 4% per year each year in the future. The current price of Gremlin's stock is $23.50 per share. What is Gremlin's equity cost of capital? A) 12% B) 14% C) 16% D) 11% 17Jumbo Transport, an air-cargo company, expects to have earnings per share of $2.00 in the coming year. It decides to retain 10% of these earnings in order to lease new aircraft. The return on this investment will be 25%. If its equity cost of capital is 11%, what is the expected share price of Jumbo Transport? A) $16.94 B) $14.83 C) $21.18 D) $12.71 18. Two mutually exclusive investment opportunities require an initial investment of $7 million. Investment A pays $1.5 million per year in perpetuity, while investment B pays $1.2 million in the first year, with cash flows increasing by 3% per year after that. At what cost of capital would an investor regard both opportunities as being equivalent? A) 8% B) 17% C) 4% D) 15% 19 19 A company has stock which costs $41.50 per share and pays a dividend of $2.50 per share this year. The company's cost of equity is 7%. What is the expected annual growth rate of the company's dividends? A) 2.94% B) 3.92% C) 1.96% D) 0.98%