Fin 7.6

Aaron Inc. has 321 million shares outstanding. It expects earnings at the end of the year to be $641 million. The firm;s equity cost of capital is 11%. Aaron pays out 50% of its earnings in total: 30% paid out as dividends, and 20% used to repurchase shares. If Aaron;s earnings re expected to grow at a constant 7% per year, what is Aaron's share price?

$24.96

Sultan Services has 1.2 million shares outstanding. It expects earnings at the end of the year of $6.0million. Sultan pays out 60% of its earnings in total: 40% paid out as dividends and 20% used to repurchase shares. If Sultan's earnings are expected to grow by 5% per year, these payout rates do not change,, and Sultan's equity cost of capital is 10%, what is Sultan's share price?

$60.00

Chittenden Enterprises has 643 million shares outstanding. It expects earnings at the end of the year to be $960million. The firm's cost of capital is 9%. Chittenden pays out 30% of its earnings in total: 20% paid out as dividends, and 10% used to repurchase shares. If Chittenden's earnings are expected to grow at a constant 3% per year, what is Chittenden's share price?

$7.47

Valence Electronics has 213 million shares outstanding. It expects earnings at the end of the year of $800million. Valence pays out 40% of its earnings in total: 15% paid out as dividends, and 25% used to repurchase shares. If Valence's equity cost of capital is 9%, what is Valence's share price?

$75.12

Which of the following models directly values all of the firm's equity, rather than a single share?

Total payout model