Investors expect a stock to pay a $1.65 dividend one year from now. They also...
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Investors expect a stock to pay a $1.65 dividend one year from now. They also expect future dividends to grow at 2.2% per year indefinitely after first dividend is paid. The required rate of return for the stock is 10.5%. Suppose new information arrives. As a result of this new information, investors do not change their estimate of the dividend mentioned earlier; however, they change their estimate of the future dividend growth rate to 4.8% per year. If markets are efficient, how much should the firm's stock price increase one investors have updated their expectations about future dividend growth?
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