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.