Aaron Inc. has

305

million shares outstanding. It expects earnings at the end of the year to be

$555

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 are expected to grow at a constant

7%

per year, what is Aaron's share price?

A.

$22.75

B.

$45.50

C.

$34.13

D. $11.38