Question
Shiskote Inc. just announced that it will cut its next dividend from $3.00 to $2.00 per share and use the extra funds to expand its
Shiskote Inc. just announced that it will cut its next dividend from $3.00 to $2.00 per share and use the extra funds to expand its operations. Prior to this announcement, Shiskote's dividends were expected to grow at 2.5% per year and Shiskote's stock was trading at $24.00 per share. With the new expansion, Shiskote's dividends are expected to grow at 8.5% per year indefinitely. Assuming that Shiskote's equity cost of capital is unchanged by the expansion, what is the value of a share of Shiskote Inc. after the dividend cut?
| $40.22 |
| $10.33 |
| $100.11 |
| $30.77 |
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