2.3%, and if the amount spent on repurchases is expected to grow by 8.9% pe as 5.9 billion shares outstanding, to what stock price does this correspond?
2.3%, and if the amount spent on repurchases is expected to grow by 8.9% pe as 5.9 billion shares outstanding, to what stock price does this correspond?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![Suppose Compco Systems pays no dividends but spent $5.15 billion on share repurchases last year. If Compco's equity cost of capital is
12.3%, and if the amount spent on repurchases is expected to grow by 8.9% per year, estimate Compco's market capitalization. If Compco
has 5.9 billion shares outstanding, to what stock price does this correspond?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F827ba08d-994f-4772-baee-875014f5695d%2Fcf9abf50-991e-422b-bfbe-e20eb4fdb629%2Fj8iot18_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose Compco Systems pays no dividends but spent $5.15 billion on share repurchases last year. If Compco's equity cost of capital is
12.3%, and if the amount spent on repurchases is expected to grow by 8.9% per year, estimate Compco's market capitalization. If Compco
has 5.9 billion shares outstanding, to what stock price does this correspond?
Expert Solution
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Step 1
Equity cost of capital refers to the sum value of money a corporation needs to pay in order to fund or in order to raise money from the market. It is basically the expected returns the investors expect from the company they have invested in.
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