(Solution) - Community Electric Power Corporation CEPC is the one and only -(2025 Original AI-Free Solution)

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Community Electric Power Corporation (CEPC) is the one and only power supplier to Uranium City, located in the far north. The power rates are regulated by the government and consequently, CEPC has had a net income of $75 million for each of the last five years. Beginning January 1, 2011, CEPC will be the monopoly supplier of power to Zinc City, located in the southeast part of the far north. CEPC will earn an additional $45 million on this new deal. CEPC has 5 million common shares outstanding and maintains a dividend payout ratio of 40%.
Required:
(a) Calculate the annual dividend per share prior to the expansion to Zinc City.
(b) What would the information signalling theory of dividends indicate that CEPC should do in 2011? Quantify your answer.