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Accounting

Problem:

Sultan Services has 1.2 million shares outstanding. It expects earnings at the end of the year of $5.6 million. Sultan pays out 60% of its earnings in total - 40% paid out as dividends and 20% used to repurchase shares.

Required:

Question: If Sultan's earnings are expected to grow by 7% per year, these payout rates do not change, and Sultan's equity cost of capital is 9%, what is Sultan's share price?

A) $22.40

B) $56.00

C) $93.33

D) $140.00

Note: Show supporting computations in good form.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91172078

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