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Pe Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate. D1

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Pe Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate. D1 Keg Pe - Price of the stock today D1 - Dividend at the end of the first year D1 - Do *(1 + 9) De = Dividend today Ke- Required rate of return g=Constant growth rate in dividends Do is currently $2.60. Ke Is 8 percent, and gis 4 percent Under Plan A. De would be immediately increased to $3.00 and K, and g will remain unchanged. Under Plan B, 0 will remain at $2.60 but g will go up to 5 percent and Ke will remain unchanged. a. Compute Po (price of the stock today) under Plan A. Note 1 will be equal to Dp * (1 . ) or $3.00 (1.04). Ke will equal 8 percent, and g will equal 4 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 Du will be equal to De * (1 + g) or $2.60 (1:05). Ke will be equal to 8 percent, and g will be equal to 5 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? O Plan A O Plan B

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