The Rufus Corporation Has 125 Million Shares Outstanding and Analysts

The Rufus Corporation has 125 million shares outstanding and analysts expect Rufus to have earnings of $500 million this year.Rufus plans to pay out 40% of its earnings in dividends and they expect to use another 20% of their earnings to repurchase shares.If Rufus' equity cost of capital is 15% and Rufus' earnings are expected to grow at a rate of 3% per year,then the value of a share of Rufus stock is closest to:

A) $13.35.
B) $33.50.
C) $20.00.
D) $16.00.

Correct Answer:

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