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A company announces a change of dividend policy after paying a dividend equal to 10 per share. The company decides to retain part of the dividends for next year in order to invest in a project which will create a higher dividend growth. Its dividend next year will thus be equal to 6 per share and it will grow at a rate of 9% in subsequent years. Just before the announcement the stock of the company had a price equal to 75 and its previous dividend growth rate was equal to 5%. What is the price of the stock after the announcement if the cost of equity remains unchanged'?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93056712

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