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CO eBook Problem 11-09 The dividend-growth model, V D. (1+) k-9 suggests that an increase in the dividend growth rate will increase the value of

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CO eBook Problem 11-09 The dividend-growth model, V D. (1+) k-9 suggests that an increase in the dividend growth rate will increase the value of a stock. However, an increase in the growth may require an increase in retained earnings 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 is 13 percent. The current dividend is $1 a share and is expected to grow annually by 5 percent, so the current market price of the stock is 513,13. 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 must be cut to $0.5 a share. Should management make the investment and reduce the dividend? Round your answer to the nearest cent. v make the investment and decrease the dividend so the management Select The value of the stock -Select to $ eBook Problem 11-09 The dividend-growth model, V D.(1 +9) k-g suggests that an increase in the dividend growth rate will increase the value of a stock. However, an increase in the gr earnings and a reduction in the current dividend. Thus, management may be faced with a dilemma: current dividends required return is 13 percent. The current dividend is $1 a share and is expected to grow annually by 5 percent, so the Management may make an investment that will increase the firm's growth rate to 6 percent, but the investment will firm's dividend must be cut to $0.5 a share. Should management make the investment and reduce the dividend? Rou The value of the stock sctv to $ so the management Select v make the investment and -Select rises declines average: 73 Do(1+9) V= K-9 d growth rate will increase the value of a stock. However, an increase in the growth may require an increase in retained dividend. Thus, management may be faced with a dilemma: current dividends versus future growth. As of now, investors at dividend is $1 a share and is expected to grow annually by 5 percent, so the current market price of the stock is $13.13. hat will increase the firm's growth rate to 6 percent, but the investment will require an increase in retained earnings, so the are. Should management make the investment and reduce the dividend? Round your answer to the nearest cent. so the management -Select- make the investment and decrease the dividend. should not should

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