JRN Enterprises Just Announced That It Plans to Cut Its

question 40

Multiple Choice

JRN Enterprises just announced that it plans to cut its dividend from $2.50 to $1.50 per share and use the extra funds to expand its operations.Prior to this announcement,JRN's dividends were expected to grow at 4% per year and JRN's stock was trading at $25.00 per share.With the new expansion,JRN's dividends are expected to grow at 8% per year indefinitely.Assuming that JRN's risk is unchanged by the expansion,the value of a share of JRN after the announcement is closest to:

• A)$25.00
• B)$15.00
• C)$31.25
• D)$27.50
• E)$29.75

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Generosity

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