A ER eBook Problem 11-09 The dividend-growth model, V D. (1+0) - suggests that an increase in the dividend growth rate wit increase the value of a stock. However, an increase in the growth may require an increase in retained earings and a reduction in the current dividend. Thus, management may be faced with a dilemma: current dividends versus future growth. As of now, investors' required return 15 8 percent. The current dividend is $1.2 a share and is expected to grow annually by 4 percent, so the current market price of the stock is $31.2. Management may make an investment that will increase the firm's growth rate to 6 percent, but the investment will require an increase in retained earnings, so the firm's dividend most be cut to $1 1 a share. Should management make the investment and reduce the dividend? Round your answer to the nearest cont The value of the stock electos so the management Seedmake the investment and decrease the dividend. Ch 11: End-of-Chapter Problems - Stock Valuation Back to Assignment Average: 73 Attempts: 9. Problem 11-09 9 eBook Problem 11-09 The dividend-growth model, V suggests that an increase in the dividend growth rate will increase the value of a st and a reduction in the -Select- vidend. Thus, management may be faced with a di is 8 percent. The curre a is $1.2 a share and is expected to grow annually make an investment thrises rease the firm's growth rate to 6 percent, but the in be cut to $1.1 a share. declines anagement make the investment and reduce the a The value of the stocks Select to $ so the management Select Grade it Valuation e: 13 Do(1+9) V= k - 9 growth rate will increase the value of a stock. However, an increase in the growth may Thus, management may be faced w -Select- na: current dividends versus future growt 2 a share and is expected to grow al percent, so the current market price of t he firm's growth rate to 6 percent, b: should not tment will require an increase in retained nent make the investment and reduc should and? Round your answer to the nearest so the management Select v make the investment and decrease the 1 Grade it Now Save & Continue