Risk is unchanged by the expansion

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Reference no: EM131065776

JRN enterprises just announced that it plans to cut its dividend from $2.25 to $1.30 per share and use the extra funds to expand its operations. Prior to this announcement, JRN's dividends were expected to grow at 5% per year and JRN's stock was trading at $25.50 per share. With the new expansion, JRN's dividends are expected to grow at 10% per year indefinitely. Assuming that JRN's risk is unchanged by the expansion, the value of a share of JRN after the announcement is closest to _________. (Note: Compute the cost of capital, r, first then compute the current price).

Reference no: EM131065776

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