Oswego Plumbing Works (ticker: OPW) just announced that it will cut next year's dividend, D1, from $2.25 to $1.50 per share and the firm will use the extra funds to expand operations. Prior to this announcement, OPW's dividends were expected to grow at 4% per year and OPW's common stock was trading at a price of $24.50 /share. With the new expansion, OPW's dividends are expected to grow at 8% per year indefinitely. Assuming the overall risk of the firm is unchanged by this expansion, the value of one share of OPW after the announcement is closest to: O A. $16.33 O B. $28.94 O C. $24.50 O D. $43.40
Oswego Plumbing Works (ticker: OPW) just announced that it will cut next year's dividend, D1, from $2.25 to $1.50 per share and the firm will use the extra funds to expand operations. Prior to this announcement, OPW's dividends were expected to grow at 4% per year and OPW's common stock was trading at a price of $24.50 /share. With the new expansion, OPW's dividends are expected to grow at 8% per year indefinitely. Assuming the overall risk of the firm is unchanged by this expansion, the value of one share of OPW after the announcement is closest to: O A. $16.33 O B. $28.94 O C. $24.50 O D. $43.40
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Oswego Plumbing Works (ticker: OPW) just announced that it will cut next year's
dividend, D,, from $2.25 to $1.50 per share and the firm will use the extra funds
to expand operations. Prior to this announcement, OPW's dividends were
expected to grow at 4% per year and OPW's common stock was trading at a
price of $24.50 /share. With the new expansion, OPW's dividends are expected
to grow at 8% per year indefinitely.
Assuming the overall risk of the firm is unchanged by this expansion, the value of
one share of OPW after the announcement is closest to:
...
O A. $16.33
O B. $28.94
O C. $24.50
O D. $43.40
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