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:

Distinguishing Products

The process of identifying unique characteristics and benefits of products to differentiate them from competitors in the market.

Generic Strategies Model

The Generic Strategies Model is a framework developed by Michael Porter that outlines three strategies organizations can use to achieve competitive advantage: cost leadership, differentiation, and focus.

Focused Cost Leadership

A strategic approach where a company aims to be the lowest-cost producer in a particular niche or segment, offering prices lower than competitors while targeting specific customer groups.

Differentiation

In business, the process of making a product or service distinct from competitors in the market, often by emphasizing unique features or benefits.