Question
Astout, a pharmaceutical company, stock currently sells for $75 per share. Two months ago the firm announced a cash dividend of $7.5 next year, and
Astout, a pharmaceutical company, stock currently sells for $75 per share. Two months ago the firm announced a cash dividend of $7.5 next year, and the dividend is expected to grow at 4%. Astout required return was 14% but due to COVID-19 outbreak and higher risk exposure the firm required return is expected to increase to 18%. Nonetheless, due to higher market demand, the divided growth rate is expected to reach 8% starting after the next dividend. Based on this information, and assuming everything else is constant, do you expect the stock price to? Select one: a. Increase b. Decrease c. Not enough information d. Remain unchanged
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