Kfc Enterprises Just Announced That It Plans To Cut Its Dividend From 2 50 To 1

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KFC Enterprises just announced that it plans to cut its dividend from $2.50 to $1.50 per share

and use the extra funds to expand its operations. Prior to this announcement, KFC’s dividends

were expected to grow at 4% per year and KFC’s stock was trading at $25.00 per share. With

the new expansion, KFC’s dividends are expected to grow at 8% per year indefinitely.

Draw the timeline of an investor’s cashflow per share, if they own KFC stock. Assuming that

KFC’s risk is unchanged by the expansion, the value of a share of KFC stock after the

announcement is closest to

 
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