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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. P0=KegD1 P0=

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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. P0=KegD1 P0= Price of the stock today D1= Dividend at the end of the first year D1=D0(1+g) D= Dividend today Ke= Required rate of return g= Constant growth rate in dividends D0 is currently $3.10,e is 10 percent, and g is 4 percent. Under Plan A, D would be immediately increased to $3.50 and ke and g will remain unchanged. Under Plan B, D will remain at $3.10 but g will go up to 5 percent and e will remain unchanged. a. Compute P (price of the stock today) under Plan A. Note D1 will be equal to D0(1+g) or $3.50(1.04).Ke will equal 10 percent, and g will equal 4 percent. (Round your intermediate calculations and final answer to 2 decimal places.) b. Compute P (price of the stock today) under Plan B. Note D1 will be equal to D(1+g) or $3.10(1.05).Ke will be equal to 10 percent, and g will be equal to 5 percent. (Round your intermediate calculations and final answer to 2 decimal places.) Answer is complete but not entirely correct. Stock price for Plan B c. Which plan will produce the higher value? Plan A Plan B

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