Use the Information for the Question(s)below

question 50

Multiple Choice

Use the information for the question(s) below.
The JRN Corporation will pay a constant dividend of $3 per share,per year,in perpetuity.Assume that all investors pay a 20% tax on dividends and that there is no capital gains tax.The cost of capital for investing in JRN stock is 12%.
-Assume that management makes a surprise announcement that JRN will no longer pay dividends but will use the cash to repurchase stock instead.The price of a share of JRN's stock is now closest to:

• A)$20.00.
• B)$25.00.
• C)$18.00.
• D)$24.00.

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Definitions:

Assignor

An assignor is an individual or entity who transfers rights or interests in a contract or property to another party, known as the assignee.

Nonperformance

Failure to fulfill a contractual duty or obligation.

Antiassignment Clause

A provision in a contract that prohibits one party from transferring its rights and obligations under the contract to another entity without consent.

Statute of Frauds

A legal principle that requires certain types of contracts to be in writing and signed by the party to be charged, to prevent fraud and perjury in contractual agreements.