Problem:
A company's stock is currently selling for 28.50. Its next dividend, payable one year from now, is expected to be 0.50 per share. The company's long-run dividend growth rate is forecast to be 7.5%. The next day the long -run dividend growth rate forecast is reduced to 7%.
Required:
Question: Determine the new stock price that keeps the yield unchanged.
Note: Please show how to work it out.