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