Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate.

P0	=	D1
		Ke g

P₀ = Price of the stock today D₁ = Dividend at the end of the first year D₁ = D₀ (1 + g) D₀ = Dividend today K_e = Required rate of return g = Constant growth rate in dividends

D₀ is currently $2.00, K_e is 8 percent, and g is 4 percent.

Under Plan A, D₀ would be immediately increased to $2.50 and K_e and g will remain unchanged. Under Plan B, D₀ will remain at $2.00 but g will go up to 5 percent and K_e will remain unchanged.

a. Compute P₀ (price of the stock today) under Plan A. Note D₁ will be equal to D₀ (1 + g) or $2.50 (1.04). K_e will equal 8 percent, and g will equal 4 percent. (Round your intermediate calculations and final answer to 2 decimal places.)

b. Compute P₀ (price of the stock today) under Plan B. Note D₁ will be equal to D₀ (1 + g) or $2.00 (1.05). K_e will be equal to 8 percent, and g will be equal to 5 percent. (Round your intermediate calculations and final answer to 2 decimal places.)

Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate Po Po Price of the stock today DDividend at the end of the first year D-Do(1+g Do Dividend today g Constant growth rate in dividends Do is currently $2.00, Ko is 8 percent, and g is 4 percent. Under Plan A, Do would be immediately increased to $2.50 and Ke and g will remain unchanged. Under Plan B, Do will remain at $2.00 but g will go up to 5 percent and Ke will remain unchanged a. Compute Po (price of the stock today) under Plan A Note Di will be equal to Do(1+g) or $2.50(1.04). Ke will equal 8 percent, and g will equal 4 percent. (Round your intermediate calculations and final answer to 2 decimal places.) Stock price for Plan A b. Compute Po (price of the stock today) under Plan B. Note D1 will be equal to Do * (1+g) or $2.00 (1.05). K will be equal to 8 percent, and g will be equal to 5 percent. (Round your intermediate calculations and final answer to 2 decimal places.) Stock price for Plan B