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?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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?
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