Sunnyfax Publishing Pays Out All Its Earnings and Has a Share

Multiple Choice

Sunnyfax Publishing pays out all its earnings and has a share price of $38.In order to expand,Sunnyfax Publishing decides to cut its dividend from $3.00 to $2.00 per share and reinvest the retained funds.Once the funds are reinvested,they are expected to grow at a rate of 12%.If the reinvestment does not affect Sunnyfax's equity cost of capital,what is the expected share price as a consequence of this decision?

A) $33.33
B) $40.00
C) $50.00
D) $60.00
E) $65.00