Question
Sunnyfax Publishing pays out all its earnings and has a share price of $38. In order to expand, Sunnyfax Publishing decides to cut its dividend
Sunnyfax Publishing pays out all its earnings and has a share price of $38. In order to expand, Sunnyfax Publishing decides to cut its dividend from $3.00 to $2.00 per share and reinvest the retained funds. Once the funds are reinvested, they are expected to grow at a rate of 12%. If the reinvestment does not affect Sunnyfax's equity cost of capital, what is the expected share price as a consequence of this decision? Please show work
| A. $50.00 |
| B. $60.00 |
| C. $40.00 |
| D. $33.33 |
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Real Estate Finance
Authors: Wolfgang Breuer, Claudia Nadler
2012th Edition
3834934496, 978-3834934499
