Surf & Turf Hotels is a mature business, although it pays no cash dividends. Next years earnings are forecast at $69 million. There are 10 million outstanding shares. The company has traditionally used 70% of earnings to repurchase shares of stock and has reinvested the remaining earnings. With reinvestment, the company has generated steady growth averaging 3% per year. Assume the cost of equity is 7%.

1. Calculate Surf & Turfs current stock price.

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

1. Now Surf & Turfs CFO announces a switch from repurchases to a regular cash dividend. Next years dividend will be $4.80 per share. The CFO reassures investors that the company will continue to pay out 70% of earnings and reinvest 30%. All future payouts will come as dividends, however. What would you expect to happen to Surf & Turfs stock price? Ignore taxes.