Expected share price as consequence of this decision

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A twenty year bond with a $1000 face value was issued with a yield to maturity of 4.2% and pays coupons semiannually. After ten years, the yield to maturity is still 4.2 % and the clean price of the bond is $959.51. After three more months go by, what would you expect the dirty price to be Sunnyfax Publishing pays out all its earnings and has a share price of $36.00. In order to expand, Sunnyfax Publishing decides to cut its dividend from $3.00 to $2.00 per share and reinvest the retained funds. Once the funds are reinvested, they are expected to grow at a rate of 15%. If the reinvestment does not affect Sunnyfax's equity cost of capital, what is the expected share price as a consequence of this decision?

Reference no: EM131999376

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