Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate. D R K-9 R = Price of the stock today = D = Dividend at the end of the first year D=Dox (1+g) Do = Dividend today Ke = Required rate of return g= = Constant growth rate in dividends Do is currently $2.90, Ke is 9 percent, and g is 5 percent. Under Plan A, Do would be immediately increased to $3.20 and Ke and g will remain unchanged. Under Plan B, D will remain at $2.90 but g will go up to 6 percent and Ke will remain unchanged. a. Compute R (price of the stock today) under Plan A. Note D will be equal to Do x (1+g) or $3.20 (1.05). Ke will equal 9 percent, and g will equal 5 percent. Note: Round your intermediate calculations and final answer to 2 decimal places. Stock price for Plan A b. Compute R (price of the stock today) under Plan B. Note D will be equal to Dox (1+g) or $2.90 (1.06). Ke will be Anual to a narrant and awill he equal to 6 nercent

Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate. P0=KgD1P0=PriceofthestocktodayD1=DividendattheendofthefirstyearD1=D0(1+g)D0=DividendtodayKc=Requiredrateofreturng=Constantgrowthrateindividends D0 is currently $2.90,Ke is 9 percent, and g is 5 percent Under Plan A, D0 would be immediately increased to $3.20 and Ke and g will remain unchanged. Under Plan B,D0 will remain at $290 but g will go up to 6 percent and Ke will remain unchanged a. Compute P0 (price of the stock today) under Plan A. Note D1 will be equal to D0(1+g) or $3.20(1.05). Ke will equal 9 percent, and g will equal 5 percent 9 percent, and g will equal 5 percent Note: Round your intermediate calculations and final answer to 2 decimal places. b. Compute R (price of the stock today) under Plan B Note D1 will be equal to D0(1+g) or $2.90(1.06). Kt will be a. Compute P0 (price of the stock today) under Plan A. Note D1 will be equal to D0(1+g) or $3.20(1.05). Ke will equal 9 percent, and g will equal 5 percent. Note: Round your intermediate calculations and final answer to 2 decimal places. b. Compute R (price of the stock today) under Plan B. Note D1 will be equal to D0(1+g) or $2.90(1.06). K. will be equal to 9 percent, and g will be equal to 6 percent. Note: Round your intermediate calculations ond final answer to 2 decimal pleces. c. Which plan will produce the higher value? ie. Plan A Plan B