Fun unlimited expects earnings per share of 240 next year, Ask an Expert

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Fun Unlimited expects earnings per share of $2.40 next year. The firm pays out all its earnings as a dividend, and based on expectations of no growth, the firm’s common stock is selling for $20. If the company cuts its payout to 60 percent and plans to invest in an expansion with an expected ROI of 10 percent, what is the expected stock price after the dividend cut? Should the firm cut its dividend? Why or why not?

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Financial Management, Finance

Category:- Financial Management
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