The Rufus Corporation Has 125 Million Shares Outstanding and Analysts

question 39

Multiple Choice

The Rufus Corporation has 125 million shares outstanding and analysts expect Rufus to have earnings of $500 million this year.Rufus plans to pay out 40% of its earnings in dividends and they expect to use another 20% of their earnings to repurchase shares.If Rufus' equity cost of capital is 15% and Rufus' earnings are expected to grow at a rate of 3% per year,then the value of a share of Rufus stock is closest to:

• A)$13.35.
• B)$33.50.
• C)$20.00.
• D)$16.00.

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Definitions:

Hostility

An emotion characterized by anger, aggression, and sometimes the intention to harm others.

Oral Stage

The oral stage is the first psychosexual development stage proposed by Freud, where an infant's pleasure centers on the mouth through activities like sucking and eating.

Excessively

To a degree exceeding normal or reasonable limits.

Fixated

In psychoanalytic theory, a term referring to the inability to progress beyond one of Freud’s psychosexual development stages, resulting in certain personality traits.