Company A has an ROE of 9%, a beta of 1.25, and with a plowback
ratio of 2/3. This year's earnings of A were $3 per share, and the
annual dividend was just paid. The consensus estimate of the
expected market return is 14% in the upcoming year, and the
risk-free return is 6%. Suppose your research suggests that A will
momentarily announce a decision that it will immediately reduce its
plowback ratio to 1/3. The market is still unaware...