Greyworth is a no-growth company expected to pay a R2-per- share annual dividend into the distant future. Its cost of equity capital is 15%. The CEO dislikes the no-growth image and proposes to halve next year's dividend to R6 per share and use the savings to acquire another firm. The CEO believes that this strategy will boost sales, earnings, and assets. Moreover, he is confident that after the acquisition, dividends in year 2 and beyond can be increased to R12.75 per share.

Please help me with the following, some advice:

a) Do you agree that the acquisition will likely increase sales, earnings, and assets? Explain briefly.

b) Estimate the per share value of Greyworth's stock immediately prior to the CEO's proposal.

c) Estimate the per share value immediately after the proposal has been announced.

d) As an owner of Greyworth, would you support the CEO's proposal? Why or why not?