Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the fund to increase its future growth rate. It will use the dividend valuation model originally presented in Chapter 10 for purposes of analysis.

D₀ is currently $2.00, K_e is 10 percent, and g is 5 percent.

Under Plan A, D0 would be immediately increased to $2.20 and K_e and g will remain unchanged.

Under Plan D, D0 will remain at $2.00 but g will go up to 6 percent and K_e will remain unchanged.

a. Compute the price of the stock today under Plan A.

b. Compute price of the stock today under Plan B.

c. Which plan will produce the higher value?