JRN Enterprises Just Announced That It Plans to Cut Its

question 50

Multiple Choice

JRN Enterprises just announced that it plans to cut its dividend from $3.00 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 indefinitely at 4% per year and JRN's stock was trading at $25.50 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) $19.32
• B) $12.75
• C) $38.63
• D) $25.50

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Definitions:

Degrees of Freedom

The number of independent values or quantities which can be freely assigned in a statistical calculation, typically influencing the shape of various distributions.

Test Statistic

A value calculated from sample data during a hypothesis test, used to decide whether to reject the null hypothesis.

P-Value

Represents the probability that the observed data would occur under the null hypothesis, used as a tool to determine the statistical significance of the results.

Member's Opinion

The perspective or belief held by an individual member of a group or organization.