Aaron Inc. has 307 million shares outstanding. It expects earnings at the end of the year to be $570 million. The firm's equity cost of capital is 10%. Aaron pays out 50% of its earnings in total: 30% paid out as dividends and 20% used to repurchase shares. If Aaron's earnings are expected to grow at a constant 5% per year, what is Aaron's share price? OA. $9.29 OB. $27.86 OC. $18.57 O D. $37.14

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Aaron Inc. has 307 million shares outstanding. It expects earnings at the end of the year to be $570 million. The firm's equity cost of capital is
10%. Aaron pays out 50% of its earnings in total: 30% paid out as dividends and 20% used to repurchase shares. If Aaron's earnings are
expected to grow at a constant 5% per year, what is Aaron's share price?
OA. $9.29
OB. $27.86
OC. $18.57
OD. $37.14
Transcribed Image Text:J Aaron Inc. has 307 million shares outstanding. It expects earnings at the end of the year to be $570 million. The firm's equity cost of capital is 10%. Aaron pays out 50% of its earnings in total: 30% paid out as dividends and 20% used to repurchase shares. If Aaron's earnings are expected to grow at a constant 5% per year, what is Aaron's share price? OA. $9.29 OB. $27.86 OC. $18.57 OD. $37.14
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