Question 7

The shares of AMC plc are currently quoted at 200p per share and the company has been paying a dividend of 30p per share for the last 10 years. The company is planning to retain the next three years' dividends to invest in a new project. The project's cash flows will begin in year 4, allowing the company to pay an increased dividend of 40p per share from that year onwards.How much would the share price change?

(a) 24.4p per share

(b) 14.2p per share

(c) 5.8p per share

(d) 10.2p per share

(e) 17.6p per share