Aaron Inc. has 301 million shares outstanding. It expects earnings at the end of the year to be $602 million. The firm's equity cost of capital is 10%. Aaron pays out 50% of it's earnings in total: 30% paid out as dividends and 20% used to repurchase shares. If Aaron's earnings are expected to grow at a constant 7% per year, what is Aaron's share price?

Aaron Inc. has 301 million shares outstanding. It expects earnings at the end of the year to be $602 million. The firm's equity cost of capital is 10%. Aaron pays out 50% of it's earnings in total: 30% paid out as dividends and 20% used to repurchase shares. If Aaron's earnings are expected to grow at a constant 7% per year, what is Aaron's share price?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 4P

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