1. Suppose Compco Systems pays no dividends but spent $5.00 billion on share repurchases last year. If? Compco's equity cost of capital is 12.0%?, and if the amount spent on repurchases is expected to grow by 8.0% per? year, estimate? Compco's market capitalization. If Compco has 6.0 billion shares? outstanding, to what stock price does this? correspond?
2. Jumbo? Transport, an? air-cargo company, expects to have earnings per share of $2.00 in the coming year. It decides to retain 10?% of these earnings in order to lease new aircraft. The return on this investment will be? 25%. If its equity cost of capital is 15?%, what is the expected share price of Jumbo? Transport?