Future Growth Rate Assignment

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
Ke = Required rate of return
g = Constant growth rate in dividends

D0 is currently $2.90, Ke is 9 percent, and g is 5 percent.
Under Plan A, D0 would be immediately increased to $3.20 and Ke and g will remain unchanged.
Under Plan B, D0 will remain at $2.90 but g will go up to 6 percent and Ke will remain unchanged.

a. Compute P0 (price of the stock today) under Plan A. Note D1 will be equal to D0 × (1 + g) or $3.20 (1.05). Ke will equal 9 percent, and g will equal 5 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 $2.90 (1.06). Ke will be equal to 9 percent, and g will be equal to 6 percent. (Round your intermediate calculations and final answer to 2 decimal places.)

c. Which plan will produce the higher value?

Calculate the price
Make an order in advance and get the best price
Pages (550 words)
$0.00
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Upload your instructions
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with Australia Assessments
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
Testimonials
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
English 101
Good job.
Customer 462899, April 26th, 2022
Entertainment & Gaming
Commendable.
Customer 452441, April 4th, 2022
Business and administrative studies
Thank you very much! Efficient and professional! I was literally "blocked" since 3 days
Customer 462519, February 3rd, 2022
ASCI 491: Operational Applications in Aeronautics
Well articulated.
Customer 457731, April 12th, 2022
Human Resources Management (HRM)
Good economics.
Customer 462499, May 1st, 2022
IT
A few mistakes but overall an excellent paper
Customer 453915, September 13th, 2022
Military
good job
Customer 456821, September 1st, 2022
Education
Excellent.
Customer 462865, April 18th, 2022
Military
Very good job
Customer 456821, May 11th, 2022
Finance/Acc Related
Good concept breakdown.
Customer 460073, July 9th, 2022
Military
very good job
Customer 456821, June 15th, 2022
Law
Good work.
Customer 462759, June 15th, 2022
11,595
Customer reviews in total
96%
Current satisfaction rate
3 pages
Average paper length
37%
Customers referred by a friend
OUR GIFT TO YOU
15% OFF your first order
Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.
Claim my 15% OFF Order in Chat