Use the Information for the Question(s)below

question 70

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's payout rate remains constant,then Defenestration's stock price is closest to:

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

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Definitions:

Risks

The potential for loss or harm when undertaking an action.

Inconsistency

The quality of being irregular or not staying the same throughout, often leading to unpredictability.

Discipline

a field of study or branch of knowledge but also refers to training people to obey rules or a code of behavior, using punishment to correct disobedience.

Rigidity

The quality of being unable to bend or be forced out of shape; often metaphorically used to describe inflexibility in thoughts, systems, or behaviors.