Soylent Corp expects to generate earnings over the coming twelve months of $$6.656.65 per share (i.e. at t=11). It has a share price today of $$49.2849.28. The firm has a policy of paying out 34.034.0% of its earnings each year as dividends to shareholders and of reinvesting the remaining 66.066.0% into new projects. Reinvested earnings provide a return on new investment of 15.215.2% per annum. However, due to a disappearing customer base, Soylent Corp will soon announce that the firm will begin paying out 69.069.0% of its earnings as dividends, retaining now 31.031.0% for investment in new projects. The return provided by earnings reinvested in new projects will remain at 15.215.2% per annum for the foreseeable future.
a) What will be the share price after this announcement? Investors are not expecting the firm to change its payout policy.
The share price forSoylent Corp after this announcement will be
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