Estimate of share price announcement

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Woolworths announces that it will cut its next dividend (that will be paid in one year) from $1.00 to $0.50 per share and use the extra funds to expand. Prior to this announcement, dividends were expected to grow at a 2% rate, and its share price was $12.50. With the expansion, Woolworth's cost of equity capital will not change, but dividends are expected to grow at a 5% rate. What is your estimate of their share price following this announcement? Is this a positive NPV project for Woolworths?

Reference no: EM133061530

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