Use the information for the question(s) below.

The JRN Corporation will pay a constant dividend of $3 per share, per year, in perpetuity. Assume that all investors pay a 20% tax on dividends and that there is no capital gains tax. The cost of capital for investing in JRN stock is 12%.

3) The price of a share of JRN's stock is closest to:

A) $20.00

B) $24.00

C) $25.00

D) $18.00

Answer: Explanation:

4) Assume that management makes a surprise announcement that JRN will no longer pay dividends but will use the cash to repurchase stock instead. The price of a share of JRN's stock is now closest to:

A) $20.00

B) $25.00

C) $18.00

D) $24.00

Answer: Explanation: