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:

Cost Centers

Parts of an organization where costs are accumulated for internal accounting purposes but do not directly generate revenue.

Flexible Budget Data

Financial information that adjusts based on changes in activity levels, often used for performance evaluation.

Profit Center

A branch or division of a company that is treated as a separate unit for the purpose of assessing its profitability.

Responsibility Report

Financial reports that track the performance of segments, departments, or managers within an organization against their budgeted or forecasted figures.