Jumbo Transport,an Air-Cargo Company,expects to Have Earnings Per Share of $2.50

question 58

Multiple Choice

Jumbo Transport,an air-cargo company,expects to have earnings per share of $2.50 in the coming year.It decides to retain 20% of these earnings in order to lease new aircraft.The return on this investment will be 25%.If its equity cost of capital is 12%,what is the expected share price of Jumbo Transport?

• A)$16.67
• B)$19.23
• C)$24.75
• D)$28.57
• E)$31.86

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