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Question - Defenestration industries plans to pay a $4.00 dividend this year and expect that the firm's earnings are on track to grow at 5% per year for the foreseeable future. Defenestration's equity cost of capital is 13%

1. Assuming that defenestration's dividend pay-out rate and expected growth rate remain constant, and defenestration does not issue or repurchase shares, then what is defenestration' stock price?

2. Suppose that defenestration decides to pay a dividends of only $2 per share this year and use the remaining $2 per share to repurchase stock. If defenestration's pay out rat remains constant, then what is defenestration's stock price?

3. Suppose that defenestration decide to pay a dividend of only $2 per share this year and use the remaining $2 per share to repurchase stock. If defenestration maintains this dividends and total pay-out rate, then what is the rate at which defenestration's dividends and earnings per share are expected to grow?

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  • Reference No.:- M93137683
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