Use the Following Information to Answer the Question(s)below

question 21

Multiple Choice

Use the following information to answer the question(s) below.
Taggart Transcontinental pays no dividends,but spent $4 billion on share repurchases last year.Taggart's equity cost of capital is 13% and the amount spent on repurchases is expected to grow by 5% per year.Taggart currently has 2 billion shares outstanding.
-Taggart's market capitalization is closest to:

• A)$25 billion.
• B)$31 billion.
• C)$40 billion.
• D)$50 billion.

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Definitions:

Underlying Asset

An asset upon which a derivative's price is based, ranging from commodities and currencies to stocks and bonds.

Call Price

The price at which a callable bond can be redeemed by the issuer before its maturity date, typically higher than the face value.

Option Value

The inherent value of an option contract, determined by factors like the underlying asset's price, the strike price, and the time until expiration.

Gamma

The curvature of an option pricing function (as a function of the value of the underlying asset).