× Didn't find what you were looking for? Ask a question
Top Posters
Since Sunday
s
3
v
3
p
3
m
2
s
2
d
2
N
2
d
2
e
2
s
2
s
2
e
2
Home Q & A Board Other Fields Homework Help Business Finance
New Topic  
johnpaech johnpaech
wrote...
Posts: 1098
Rep: 7 0
6 years ago
The Rufus Corporation has 125 million shares outstanding and analysts expect Rufus to have earnings of $500 million this year.  Rufus plans to pay out 40% of its earnings in dividends and they expect to use another 20% of their earnings to repurchase shares.  If Rufus' equity cost of capital is 15% and Rufus' earnings are expected to grow at a rate of 3% per year, then the value of a share of Rufus stock is closest to:
A) $13.35
B) $33.50
C) $20.00
D) $16.00
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
Read 64 times
2 Replies

Related Topics

Replies
wrote...
#1
6 years ago
C
Explanation:  C) Dividends = $500 × .40 = $200 million
Repurchases = $500 × .20 = $100 million

PV(Future Total Dividends and Repurchases) = ($200 + $100)/(.15 - .03) = $2500 million

P0 = $2500 million/125 million shares = $20 per share
johnpaech Author
wrote...
#2
6 years ago
You took a load off my back, thanks for answering correctly
New Topic      
Quick Reply
Explore
Post your homework questions and get free online help from our incredible volunteers
  1263 People Browsing
Start New Topic Take the Tour CoursesNew Study Tools Topics Trending Browse by Textbook
Live Chat
Related Images
  
 278
  
 790
  
 383
Your Opinion
Which industry do you think artificial intelligence (AI) will impact the most?
Votes: 484
Previous poll results: Which of the following is the best resource to supplement your studies: