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Return to ques Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth
Return to ques Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate. DY Po - Po - Price of the stock today D1 - Dividend at the end of the first year D1 - Do (1+) Do - Dividend today Ko - Required rate of return g=Constant growth rate in dividends Do is currently $2.20, Ke Is 12 percent, and gis 4 percent Under Plan A, Do would be immediately increased to $2,80 and X, and will remain unchanged, Under Plan B. Do will remain at $2.20 but will go up to 5 percent and K, will remain unchanged. a. Computer (price of the stock today) under Plan A. Note 2, will be equal to Do 11 + 91 or $2.80 (1,04). Ke will equal 12 percent, and g will equal 4 percent. (Round your intermediate calculations and final answer to 2 decimal places.) Answer is complete but not entirely correct. Stock price for Plan A 78.00 X Rerum to 9 Answer is complete but not entirely correct. Stock price for Plan A $ 78.00 b. Computer (price of the stock today) under Plan B. Note D, will be equal to Do - (1 + y) or $2.20 (1.05). K will be equal to 12 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 Pian B 91.00 $ c. Which plon will produce the higher value? Plan BO Plan A
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