a) Beatrix Beverage Company currently just paid a dividend of $4.40 per share. Beatrixs current payout ratio is 100%, so their earnings per share is $4.40 as well. Dividends are expected to remain constant indefinitely. Suppose the discount rate for Beatrix is 11 percent per year. What is the fundamental value of a share of Beatrix Beverage stock?

b) Now, suppose that Beatrix is planning to introduce Crazy Cola, a new energy drink. Suppose the new project will result in a constant annual growth in dividends. Upon announcement of the project, the share price jumps by 25 percent. Estimate g, the dividend growth rate, that will result from the new drink.