Cooperton Mining just announced it will cut its dividend from $4.22 to $2.58 per share and use the extra funds to expand. Prior to the​ announcement, Cooperton's dividends were expected to grow at a 3.3% ​rate, and its share price was $48.52. With the planned​ expansion, Cooperton's dividends are expected to grow at a 4.7% rate. What share price would you expect after the​ announcement? (Assume that the new expansion does not change​ Cooperton's risk.) Is the expansion a good​ investment?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Cooperton Mining just announced it will cut its dividend from

$4.22

to

$2.58

per share and use the extra funds to expand. Prior to the​ announcement, Cooperton's dividends were expected to grow at a

3.3%

​rate, and its share price was

$48.52.

With the planned​ expansion, Cooperton's dividends are expected to grow at a

4.7%

rate. What share price would you expect after the​ announcement? (Assume that the new expansion does not change​ Cooperton's risk.) Is the expansion a good​ investment?

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