Question: Problem 10 Intro Boston Bakery's current dividend policy is to pay out 80% of earnings as dividends. It just paid an annual dividend of $3.18

Problem 10 Intro Boston Bakery's current dividend policy is to pay out 80% of earnings as dividends. It just paid an annual dividend

Problem 10 Intro Boston Bakery's current dividend policy is to pay out 80% of earnings as dividends. It just paid an annual dividend of $3.18 per share, and dividends are expected to grow by 2% per year. The required rate of return is 13%. Part 1 IB | Attempt 1/10 for 10 pts. What is the value of the stock? 1+ decimals Submit - Attempt 1/10 for 10 pts. Part 2 The company is now considering changing its dividend policy and reinvesting 70% of its earnings for faster growth in the future. Under the new policy, the company expects dividends to grow by 7% per year. However, reinvesting more funds implies paying out less to shareholders, so the last dividend would have been only $1.19 under the new policy. What is the value of the stock under the new policy? 1+ decimals Submit | Attempt 1/4 for 10 pts. Part 3 What should the company do? Change to the new policy Keep the existing policy Submit

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