Killnum Corp. announces that the dividend for the next year will be $2.50 per share rather than the originally expected $1.50 per share.
From then on, it is expected that dividends will resume their historical constant growth rate of 5% per year from the originally expected $1.50 per share for next year.
What would you expect to happen to the price of the stock? Ignore any tax effects.
a. The price will likely double.
b. The price will likely rise by 66.67%.
c. The price will likely rise by exactly 50%.
d. The price will remain unchanged.
e. The price will likely rise by the present value of $1.