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A company has 250 shares outstanding, earns $6,000 per year and is expected to pay...

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Finance

A company has 250 shares outstanding, earns $6,000 per year and is expected to pay all of it as dividends. If the firm expects to maintain this dividend forever, calculate the stock price after the dividend payment. (The required rate of return is 12 percent.) Assume that the company announces that it will use its earnings to repurchase its shares. Calculate the number of shares outstanding at the end of year 1, after the first share repurchase, under the same required rate of return.

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