What will be the new stock price of plebane

Reference no: EM13288756

The stock of Plebane, Inc. currently sells for $15.00 per share. The company just paid a dividend of $2.10 per share and the current market price per share (i.e., $15.00) is based on investor belief that the dividends of the company will remain constant forever. Unknown to the market, however, is that Plebane is about to announce the introduction of a modified product line that will cause the future earnings and therefore dividends of the company to grow at a rate of 4 percent per year forever, starting today. This new growth rate will begin with the dividend to be paid one year from today. The modified product line will not in any way impact the required rate of return for the stock of Plebane, Incorporated. Assuming that the market reacts rationally, what will be the new stock price of Plebane, Incorporated after the announcement?

Reference no: EM13288756

Questions Cloud

Find the electric dipole moment of the object : A small rigid object carries positive and negative 4.00 nC charges. It is oriented so that the positive charge has coordinates, Find the electric dipole moment of the object

Calculate the energy stored in the parallel-plate capacitor : A parallel-plate air-filled capacitor having plates of area 60m2 and plate spacing 1.5 mm is charged to apotential differences of 300V. Find (a) the electric field betweenthe plates, (d) the capacitance, and (e) use C and V to calculate the energy ..

What is the magnitude of the seals displacement : In diving to a depth of 983 m, an elephant seal also moves 693 m due east of his starting point. What is the magnitude of the seal's displacement

Find how much work was done by the gravitational force : Spiderman, whose mass is 70.0 kg, is dangling on the free end of a 12.6-m-long rope, the other end of which is fixed to a tree limb above. find How much work was done by the gravitational force on Spiderman in this maneuver

What will be the new stock price of plebane : Assuming that the market reacts rationally, what will be the new stock price of Plebane, Incorporated after the announcement?

How fast does the airplane move : An airplane moves at 120 m/sec to the west with respect to the air. How fast does the airplane move

Which projects should be undertaken : Compare the internal rate of return for both projects. Compute the NPV for both projects, using a cost of capital of 10 percent.

By how much did the companies retained earnings increase : Polycom Systems earned $480 million last year and paid out 20% of earnings in dividends.

What would be the value of one right : Prime Bankcorp has issued rights to its shareholders. The subscription price is $50 and five rights are needed along with the subscription price to buy one of the new shares. The stock is selling for $59 rights-on.

User Account

All Pages