The dividend-growth model, V Do(1+) -9 suggests that an increase in the dividend growth rate will increase the value of a stock

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The dividend-growth model, V Do(1+) -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 venus future growth. As of now, investors' required return is 11 percent. The current dividend is $0.9 a share and is expected to grow annually by 6 percent, so the current market price of the stock is $19.08. Management may make an investment that wil increase the firm's growth rate to 10 percent, but the investment will require an increase in retained camings, so the firm's dividend must be cut to $0.8 a share. Should management make the investment and reduce the dividend Round your answer to the nearest cent. The value of the stock Select to $ so the management Select make the investment and decrease the dividend. Grade It Now Save & Continue Continue without saving