Question: Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate Pe -

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

Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate Pe - 01 Ke-9 Po = Price of the stock today D = Dividend at the end of the first year 01 - Do *(1 + 9) De=Dividend today ke=Required rate of return g=Constant growth rate in dividends De is currently $3.50, ke is 9 percent, and gis 5 percent Under Plan A. De would be immediately increased to $4.00 and Xe and will remain unchanged Under Plan B, Do will remain at $3,50 but g will go up to 6 percent and Ky will remain unchanged a. Compute Pe (price of the stock today) under Plan A. Note 0 will be equal to 0 (1 + g) or $4.00 (1.05). K will equal 9 percent, and g will equal 5 percent. (Round your intermediate calculations and final answer to 2 decimal places Stock price for Plan A b. Compute Pe price of the stock today) under Plan B Note D, will be equal to Dp (1) or $3.50 (1.06). K will be equal to 9 percent, and will be equal to 6 percent. (Round your intermediate calculations and final answer to 2 decimal places.) Stock price for Plan B

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