Suppose That the Total Value of Dividends to Be Paid

Multiple Choice

Suppose that the total value of dividends to be paid by companies in the Narnian stock market index is $100 billion.Investors expect dividends to grow over the long term by 5% annually,and they require a 10% return.Now a collapse in the economy leads investors to revise their growth estimate down to 4%.By how much should market values change?

A) −16.67%.
B) zero.
C) −20%.
D) +20%.