House of Haddock has 3,300 shares outstanding and the stock price is $180. The company is expected to pay a dividend of $36 per share next year, and thereafter, the dividend is expected to grow indefinitely by 5% a year. The president, George Mullet, now makes a surprise announcement: He says that the company will henceforth distribute half the cash in the form of dividends and the remainder will be used to repurchase stock. The firm is expected to generate earnings of $118,800 each year. The annual dividend will be paid prior to the stock repurchase.

a. What is the total value of the company before the announcement?

b. What should be the total value after the announcement?

c. What must be the expected rate of return on equity? (Do not round intermediate calculations.)

d. What will be the dividend growth rate when the firm switches to the new distribution method? (Do not round intermediate calculations. Round your percentage answer to 2 decimal places.)