Company XYZ is trying to decide whether to cut its expected dividends for next year from $12 per share to $8 per share. If it does not cut the dividend, the firms expected rate of growth in dividends is 5 percent per year and the price of their common stock will be $120 per share. However, if it cuts its dividend, the dividend growth rate is expected to rise to 9 percent in the future. Assuming that the investor's required rate of return for the stock does not change, what would you expect to happen to the price of its common stock if it cuts the dividend? Should company XYZ cut its dividend?

$108.2 per share and should not cut its dividends

$124.7 per share and should cut its dividends

$133.3 per share and should cut its dividends

$152.6 per share and should cut its dividends

$183.4 per share and should cut its dividends

Company XYZ is trying to decide whether to cut its expected dividends for next year from $12 per share to $8 per share. If it does not cut the dividend, the firms expected rate of growth in dividends is 5 percent per year and the price of their common stock will be $120 per share. However, if it cuts its dividend, the dividend growth rate is expected to rise to 9 percent in the future. Assuming that the investor's required rate of return for the stock does not change, what would you expect to happen to the price of its common stock if it cuts the dividend? Should company XYZ cut its dividend?

		$108.2 per share and should not cut its dividends
		$124.7 per share and should cut its dividends
		$133.3 per share and should cut its dividends
		$152.6 per share and should cut its dividends
		$183.4 per share and should cut its dividends