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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Definitions:

Analogical Thinking

A cognitive process of transferring information or meaning from a particular subject to another based on their similarity.

Metaphorical Thinking

A cognitive process that uses metaphor or symbolic comparison to understand and conceptualize complex ideas or phenomena by relating them to familiar objects or concepts.

Creativity

The ability to produce original and valuable ideas or solutions by thinking beyond established patterns or perspectives.

Incubation

Unconscious processing that works on a specific problem while the mind is otherwise occupied.