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Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate. Pos-Ke-9 Di

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Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate. Pos-Ke-9 Di Po = Price of the stock today D = Dividend at the end of the first year D1 - Dex (1 + 9) De = Dividend today Ke = Required rate of return g=Constant growth rate in dividends Dy is currently $3.20, K, is 11 percent, and g is 6 percent Under Plan A, D would be immediately increased to $3.60 and K, and g will remain unchanged. Under Plan B, D, will remain at $3.20 but g will go up to 7 percent and Ke will remain unchanged. a. Compute Pe (price of the stock today) under Plan A. Note Dwill be equal to Do X (1 + g) or $3.60 (1.06). Ke will equal 11 percent, and g will equal 6 percent. (Round your intermediate calculations and final answer to 2 decimal places.) Stock price for Plan A b. Compute Pe (price of the stock today) under Plan B. Note D will be equal to De X (1 + g) or $3.20 (1.07). Ke will be equal to 11 percent, and g will be equal to 7 percent. (Round your intermediate calculations and final answer to 2 decimal places.) Stock price for Plan B c. Which plan will produce the higher value

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