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Oswego Plumbing Works (ticker: OPW) just announced that it will cut next year's dividend, D1,...

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Question

Finance

Oswego Plumbing Works (ticker: OPW) just announced that it will cut next year's dividend,

D1,

from

$2.00

to

$1.40

per share and the firm will use the extra funds to expand operations. Prior to this announcement, OPW's dividends were expected to grow at

3%

per year and OPW's common stock was trading at a price of

$25.00

/share. With the new expansion, OPW's dividends are expected to grow at

6%

per year indefinitely.

Assuming the overall risk of the firm is unchanged by this expansion, the value of one share of OPW after the announcement is closest to

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