Question: Synchole Corp. is trying to decide whether to cut its expected dividends for next year from $8 per share to $5 per share in order
Synchole Corp. is trying to decide whether to cut its expected dividends for next year from $8 per share to $5 per share in order to have more money to invest in new projects. If it does not cut the dividend, the firm's expected rate of growth in dividends is 2.2% per year and the price of its common stock will be $115 per share. However, if it cuts its dividend, the dividend growth rate is expected to be 5.5% 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 Synchole's common stock if the company cuts the dividend to $5? Should Synchole Corp. cut its dividend? $151.52; Should not cut its dividend $144.26; Should cut its dividend $151.52; Should cut its dividend $136.74; Should cut its dividend $136.74; Should not cut its dividend
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
