The Delos Corporation expects to have earnings per share of $6 in the coming year....
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The Delos Corporation expects to have earnings per share of $6 in the coming year. Rather than reinvest these earnings and grow, the firm plans to pay out all its earnings as a dividend. With these expectations of no growth, Deloss current share price is $40. (b) Suppose Delos could cut its dividend payout rate to 50% for the foreseeable future and use the retained earnings to open new amusement parks. The return on its investment in these parks is expected to be 10%. Assuming its equity cost of capital is unchanged, what effect would this new policy have on Deloss stock price? Should Delos open new amusement parks
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