Alexas Corporation Reports the Following -Analysts' Expected Earnings for Alexas for Next Two Years Are

Alexas Corporation reports the following:
$$\begin{array} { l l } & \mathbf { 2 0 0 5 } \\\text { Earnings per share } & \$ 1.80 \\\text { Dividends per share } & \$ 0.72 \\\text { Book value per share- at the end of the } &\$ 8.62\\\text { year } & \end{array}$$
-Analysts' expected earnings for Alexas for next two years are:

2006: $2.00
2007: $2.23

Cost of equity is 15%. Return on equity is expected to equal cost of equity from 2008 onwards. Dividend payout ratio is expected to remain the same for 2006 and 2007. Price per share at the end of 2005 would be closest to:

A) $9.45.
B) $9.81.
C) $9.89.
D) Not determinable

Correct Answer:

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