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:

Synthesis Reactions

Chemical reactions in which two or more substances combine to form a more complex product.

Catabolism

The breakdown of complex molecules into smaller units, releasing energy in the process.

Anabolism

The aspect of metabolism that involves the creation of complex molecules from simpler ones, leading to growth.

Hydrolysis

A chemical reaction where water is used to break down the bonds of a compound, resulting in the decomposition of that compound into its constitutive elements or simpler compounds.