Use the Information for the Question(s)below

question 50

Multiple Choice

Use the information for the question(s) below.
The JRN Corporation will pay a constant dividend of $3 per share,per year,in perpetuity.Assume that all investors pay a 20% tax on dividends and that there is no capital gains tax.The cost of capital for investing in JRN stock is 12%.
-Assume that management makes a surprise announcement that JRN will no longer pay dividends but will use the cash to repurchase stock instead.The price of a share of JRN's stock is now closest to:

• A)$20.00.
• B)$25.00.
• C)$18.00.
• D)$24.00.

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Definitions:

Rational-emotive Therapy

A psychotherapeutic approach that focuses on resolving emotional and behavioral problems by confronting irrational beliefs and changing them into rational ones.

Cognitive-behavioral Therapy

A psychological treatment approach that addresses problematic thoughts and behaviors through a goal-oriented process.

Beck

Refers to Aaron T. Beck, an influential figure in the field of psychology known for his work on cognitive therapy and depression.

Ellis

Albert Ellis was an influential psychologist who founded Rational Emotive Behavior Therapy (REBT), a precursor to Cognitive Behavioral Therapy (CBT), focusing on identifying and changing irrational beliefs.