Find what is the equity cost of capital

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Question: Cooperton Mining just announced it will cut its dividend from $4.64 to $2.94 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.1% rate, and its share price was $50.04. With the new expansion, Cooperton's dividends are expected to grow at a 4.8% rate. What share price would you expect after the announcement? (Assume Cooperton's risk is unchanged by the new expansion.) Is the expansion a positive NPV investment? What share price would you expect after the announcement?

a) The equity cost of capital is % (Round to two decimal places.)

b) The new share price will be $ (Round to the nearest cent.)

c) Is the expansion a positive NPV investment? In this case, cutting the dividend to expand a positive NPV investment.

Reference no: EM131962732

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