Green Ltd$.$s earnings for the year amounted to $$1,200,000$ which exceeded their earnings projection. Their cash budget for the year indicates that they will have excess cash amounting to $$700,000$ and the Board of Directors is meeting to decide whether to pay out the extra cash to their shareholders in the form of dividends or reinvest it in the company.

The company has $600,000$ shares outstanding and a P$/$E ratio of $18.$

If the funds are retained and reinvested at $12$ percent, the company$$s P$/$E ratio would increase by $25$ percent.

On the other hand, if the funds are paid out in the form of dividends, it is expected that the P$/$E ratio will increase by $16$ percent.

Required: Advise the Board on the effect that these actions would have on the Company$$s share price and make a recommendation as to which action they should take. Provide calculations to support your recommendation.