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​​(Common stock​ valuation)  Dubai​ Metro's stock price was at ​$90 per share when it announced that...

​​(Common stock​ valuation)  Dubai​ Metro's stock price was at ​$90 per share when it announced that it will cut its dividend for next year from ​$10 per share to ​$6 per​ share, with additional funds used for expansion. Prior to the dividend​ cut, Dubai Metro expected its dividends to grow at a 7 percent​ rate, but with the​ expansion, dividends are now expected to grow at 10 percent. How do you think the announcement will affect Dubai​ Metro's stock​ price?

a.  What is the​ investor's required rate of return for Dubai​ Metro's stock?

      ​(Round to two decimal​ places.)

b.  What would be the price of Dubai​ Metro's stock if they cut the dividend to ​$6​?

​$. (Round to the nearest​ cent.)

c.  How do you think Dubai​ Metro's stock price will react to the​ announcement? ​ (Select from the​ drop-down menu.)

If Dubai Metro were to cut the​ dividend, the price of the common stock will

decrease.

increase.

not change.

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