The stock of Robotic Atlanta Inc. is trading at $ 33.00 per share. In the past, the firm has paid a constant dividend of $ 5.92 per share and it has just paid an annual dividend (i.e., D0 = 5.92 ). 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 2.5 % forever. Assuming that the discount rate remains the same.

What will be the price of the stock after the announcement?

Answer rating: 100% (QA)

To calculate the new price of the stock we need to use the dividend discount model which states that ... View the full answer