Answer Happy

Problem 18-16 Dividend valuation model and wealth maximization [LO18-2] Om Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate. -Price of the stock today Dividend at the end of the first year ₂-A (24) D-Dividend today Required rate of retur g-Constant growth rate in dividends currently $2.20, s 12 percent, and gis 4 percent Under Plan A Under Plan B would be immediately increased to $2.80 and x, and g will remain unchanged. will remain at $2.20 but gwill go up to 5 percent and x, will remain unchanged. a. Compute price of the stock today) under Plan A. Note D, will be equal to (1) or $2.80 (104) , will equal 12 percent, and gwll equal 4 percent (Round your Intermediate calculations and final answer to 2 decimal places) Stock price for Plan A S 65 00 b. Compute price of the stock today) under Plan B.'Note D will be equal to (1) or $2.20 (105) will be equal to 12 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 $ 70.00