Intro

LightWorks Inc. has a cost of equity of 12%. The firm will pay an annual dividend of $2.4 in one year and its dividends had been expected to grow by 6% per year thereafter. You just heard on the news that LightWorks has changed its growth forecasts and now expects its dividend to grow by 4% per year forever after the first year.

Attempt 1/10 for 10 pts.

Part 1

What is the change in the intrinsic value of LightWorks (in $)? Choose the right sign.

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Attempt 1/10 for 10 pts.

Part 2

If you tried to sell LightWorks stock immediately after the news broadcast, what price would you most probably get?

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