Omni Telecom is trying to decide whether to increase its cash dividend or use the funds to increase its future growth rate. It will use the dividend valuation model (Chapter 10) for purposes of analysis. The current values are the following:

D₀ = $1.50 K_e = 10% g = 4%

Under Plan A, the dividend (D₁) will be increased to $1.80with K, and gun changed. Under Plan B, the dividend (D₁) will remain at $1.50, K_e will remain unchanged, but g will increase to 6%.

a. Compute the current price under Plan A.

b. Compute the current price under Plan B.

c. Which plan produced the higher value? Suggest a reason why.