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Paul is the CEO of CU . When he took over the company 8 years ago the price of $ 2 0 per share. CO

Paul is the CEO of CU. When he took over the company 8 years ago the price of $20 per share. CO is an all equity firm that has a policy paying out of 85% of its earning in dividends. Nell wants to increase the amount of money he plows back into the firm in order to grow the company. He expects the company to continue earning 12% annual IRR on the capital they invest. OVer the past 12 months, CU paid $3 in dividends. Assume the effective annual discount rate for CU is 12%. What is the impact of Paul's stocks if he increases the plowback ration to 60% and keeps it there forever(i.e how much value does the new investment plan to creaste or destroy per share?

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