The Vinson Corporation has earnings of $$828,500$ with $380,000$

shares outstanding. $$Its P$/$E ratio is $12.$ The firm is holding

$$430,000$ 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.

a$.$Compute the price of the stock under the

two plans.$($Do not round intermediate calculations and

round your answers to $2$ decimal places.$)$

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$$ Price of stock $$Retention plan:Payout Plan:

b$.$Which plan will maximize the market value

of the stock?

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