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 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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