Q1:

Munchy Foods is considering cutting its dividend this year from $0.25 to $0.20 per share and use the extra funds to expand. Currently, Munchy's dividends are expected to grow at a 4.5% annual rate, and its share price is $5. With the new expansion, Munchy's dividends are expected to grow at a 5% annual rate.

What share price would you expect if Munchy Foods decides to pursue this expansion and makes an announcement (Assume their risk is unchanged by the new expansion)? Is the expansion adding value to the shareholders of Munchy Foods?