Oswego Plumbing Works (ticker: OPW) just announced that it will cut next year's dividend, D1, from $2.25 to $1.50 per share and the firm will use the extra funds to expand operations. Prior to this announcement, OPW's dividends were expected to grow at 4% per year and OPW's common stock was trading at a price of $24.50 /share. With the new expansion, OPW's dividends are expected to grow at 8% per year indefinitely. Assuming the overall risk of the firm is unchanged by this expansion, the value of one share of OPW after the announcement is closest to: O A. $16.33 O B. $28.94 O C. $24.50 O D. $43.40

Oswego Plumbing Works (ticker: OPW) just announced that it will cut next year's dividend, D1, from $2.25 to $1.50 per share and the firm will use the extra funds to expand operations. Prior to this announcement, OPW's dividends were expected to grow at 4% per year and OPW's common stock was trading at a price of $24.50 /share. With the new expansion, OPW's dividends are expected to grow at 8% per year indefinitely. Assuming the overall risk of the firm is unchanged by this expansion, the value of one share of OPW after the announcement is closest to: O A. $16.33 O B. $28.94 O C. $24.50 O D. $43.40

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 15P

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