Use the Information for the Question(s)below

question 87

Multiple Choice

Use the information for the question(s) below.
Defenestration Industries plans to pay a $4.00 dividend this year and you expect that the firm's earnings are on track to grow at 5% per year for the foreseeable future.Defenestration's equity cost of capital is 13%.
-Suppose that Defenestration decides to pay a dividend of only $2 per share this year and use the remaining $2 per share to repurchase stock.If Defenestration maintains this dividend and total payout rate,then the rate at which Defenestration's dividends and earnings per share are expected to grow is closest to:

• A)7%.
• B)13%.
• C)9%.
• D)5%.

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