The stock of Robotic Atlanta Inc. is trading at $38.61 per share. In the past, the firm has paid a constant dividend (i.e., g = 0) of $4.02 per share and it has just paid an annual dividend (i.e., D0 = 4.02). However, the company will announce today new investments that the market did not know about. It is expected that with these new investments, the dividends will grow at 6.4% forever. Assuming that the discount rate remains the same, what will be the price of the stock after the announcement?
The stock of Robotic Atlanta Inc. is trading at $38.61 per share. In the past, the firm has paid a constant
dividend (i.e., g = 0) of $4.02 per share and it has just paid an annual dividend (i.e., D0 = 4.02). However, the company will announce today new investments that the market did not know about. It is expected that with these new investments, the dividends will grow at 6.4% forever. Assuming that the discount rate remains the same, what will be the price of the stock after the announcement?
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