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Oswego Plumbing Works (ticker: OPW) just announced that it will cut next year's dividend, D1, from $2.75 to $1.50 per share and the firm will
Oswego Plumbing Works (ticker: OPW) just announced that it will cut next year's dividend, D1, from $2.75 to $1.50 per share and the firm will use the extra funds to expand operations. Prior to this announcement, OPW's dividends were expected to grow at 3% per year and OPW's common stock was trading at a price of $24.00/ share. With the new expansion, OPW's dividends are expected to grow at 6% per year indefinitely. Assuming the overall risk of the firm is unchanged by this expansion, the value of one share of OPW after the announcement is closest to: A. $13.09 B. $17.73 C. $24.00 D. $32.51
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