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Sunnyfax Publishing pays out all its earnings and has a share price of $36.00. In order to expand, Sunnyfax Publishing decides to cut its
Sunnyfax Publishing pays out all its earnings and has a share price of $36.00. 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 15%. If the reinvestment does not affect Sunnyfax's equity cost of capital, what is the expected share price as a consequence of this decision?
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