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JRN Enterprises just announced that it plans to cut its dividend from $3.00 to $1.50 per share and use the extra funds to expand its operations. Prior to this announcement, JRN's dividends were expected to grow indefinitely at 4% 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 8% 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 ________. (Hint: solve for the cost of equity using the original information. This will still be the cost of equity after the change in dividends)

User Jon Artus
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Answer:

$19.32

Step-by-step explanation:

User Shaharyar
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