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What share price would you expect

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Question - Superwoman Corp just announced it will cut its dividend from $4 to $2.50 per share and use the extra funds to expand. Prior to the announcement, Superwoman's dividends were expected to grow at a 3% rate, and its share price was $50. With the new expansion, Superwoman's dividends are expected to grow at a 5% rate.

i. What share price would you expect after the announcement? (Assume Superwoman's risk is unchanged by the new expansion.

ii. Is the expansion a positive NPV investment?

iii. How would a change in risk affect your answer?

Reference no: EM132550591

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