Chittenden Enterprises Has 632 Million Shares on Issue

question 2

Multiple Choice

Chittenden Enterprises has 632 million shares on issue. It expects earnings at the end of the year to be $940 million. The firm's equity cost of capital is 10%. Chittenden pays out 30% of its earnings in total: 20% paid out as dividends and 10% used to repurchase shares. If Chittenden's earnings are expected to grow at a constant 4% per year, what is Chittenden's share price?

• A)$3.36
• B)$14.88
• C)$7.44
• D)$4.96

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