What should happen to the value of piotr common shares

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Piotr Co. recently paid a dividend of $2.25 on its common shares.Prior to new information becoming available today, Piotr's dividends were expected to grow at a constant rate of 2% and its investors required a 15% return on Piotr's common shares.

Problem 1: Today, Piotr's CEO announced that the next dividend (to be paid next year) would be only $1.90. This announcement, along with other market conditions, caused investors to reassess Piotr's risk, resulting in an increase in their required return to 17% and a reduction of the expected future growth rate of dividends to 1.1%. What should happen to the value of Piotr's common shares following this announcement?

a) A decline of $2.96 per share
b) A decline of $4.12 per share
c) A decline of $5.36 per share
d) A decline of $5.70 per share

Reference no: EM132887492

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