Aaron Inc Has 321 Million Shares Outstanding

question 20

Multiple Choice

Aaron Inc. has 321 million shares outstanding. It expects earnings at the end of the year to be $641 million. The firm's equity cost of capital is 11%. Aaron pays out 50% of its earnings in total: 30% paid out as dividends and 20% used to repurchase shares. If Aaron's earnings are expected to grow at a constant 7% per year, what is Aaron's share price?

• A) $12.48
• B) $24.96
• C) $37.44
• D) $49.92

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Definitions:

Overhead Applied

The amount of overhead cost allocated to specific products or cost centers based on a predetermined rate.

Job A496

A specific project or order identifier, representing a unique job or task within a job costing system.

Machine Hours

A measurement of the amount of time a machine is operated during a given period.

Variable Manufacturing Overhead

Costs of manufacturing that vary with the level of production, such as supplies and utilities used in the production process.