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Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate. P=KegD1 P0= Price of the stock today D1= Dividend at the end of the first year D1=D0(1+g) D0= Dividend today Ke= Required rate of return g= Constant growth rate in dividends D0 is currently $2.00,Ke is 10 percent, and g is 4 percent. Under Plan A,D would be immediately increased to $2.50 and Ke and g will remain unchanged. Under Plan B,D will remain at $2.00 but g will go up to 5 percent and Ke will remain unchanged. a. Compute P (price of the stock today) under Plan A. Note D1 will be equal to D(1+g) or $2.50(1.04).Ke will equal 10 percent, and g will equal 4 percent. (Round your intermediate calculations and final answer to 2 decimal places.) a. Compute P0 (price of the stock today) under Plan A. Note D1 will be equal to D(1+g) or $2.50(1.04). Ke will equal 10 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). Ke will be equal to 10 percent, and g will be equal to 5 percent. (Round your intermediate calculations and final answer to 2 decimal places.) c. Which plan will produce the higher value? Plan B Plan A

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