Use the Information for the Question(s)below

question 74

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%.
-Assuming that Defenestration's dividend payout rate and expected growth rate remain constant,and Defenestration does not issue or repurchase shares,then Defenestration's stock price is closest to:

• A)$50.00.
• B)$32.30.
• C)$22.25.
• D)$30.75.

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Definitions:

Inelastic Supply

Refers to a market scenario where the quantity supplied does not change significantly when the price of the product changes.

Marginal Tax Rate

The rate at which the last dollar of a person's income is taxed, reflecting the percentage of additional income that will be taken as tax.

Tax Liability

The total amount of tax that an individual or entity is legally obliged to pay to a taxing authority based on their income, assets, or activities.