The Vinson Corporation has earnings of $500,000 with 250,000 shares outstanding. Its P/E ratio is 20. The firm is holding $300,000 of funds to invest or pay out in dividends. If the funds are retained, the aftertax return on investment will be 15 percent, and this will add to present earnings. The 15 percent is the normal return anticipated for the corporation, and the P/E ratio would remain unchanged. If the funds are paid out in the form of dividends, the P/E ratio will increase by 10 percent because the stockholders in this corporation have a preference for dividends over retained earnings. Which plan will maximize the market value of the stock? Solution Problem 18-15 Instructions Enter formulas to complete the requirements of this problem. Information Return on investment 15% Funds to invest or pay out $300,000 Earnings $500,000 Shares outstanding 250,000 P/E 20 Retained Earnings Incremental earnings FORMULA Earnings per share FORMULA Price of stock FORMULA Payout Earnings New P/E FORMULA Earnings per share FORMULA Price of stock FORMULA Which plan will maximize the market value of the stock? Please include the Excel formulas in solution. Thank you