On a Certain Date, Harvey Norman Has a Share Price

question 22

Multiple Choice

On a certain date, Harvey Norman has a share price of $37.50, pays a dividend of $0.64, and has a? equity cost of capital of 8%. An investor expects the dividend rate to increase by 6% per year in perpetuity. He then sells all Harvey Norman shares that he owns. Given Harvey Norman's share price, was this a reasonable action?

• A) No, since the constant dividend growth rate gives a share price estimate of $37.50.
• B) Yes, since the constant dividend growth rate gives a share price estimate greater than $37.50.
• C) No, since the constant dividend growth rate gives a share price estimate greater than $37.50.
• D) No, since the difference between his calculated share price and the actual share price most likely indicates that his estimate of dividend growth rate was incorrect.

Understand different retail formats and categorization.

Recognize the strategic roles and responsibilities within retail management.

Identify trends affecting modern retailing.

Comprehend the assortment and merchandising strategies in retail.

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Definitions:

Equilibrium Price

The market price at which the quantity of a good supplied equals the quantity demanded, leading to a stable market condition.

Price Ceilings

Government-imposed limits on how high a price can be charged for a product or service, aimed at protecting consumers.

Ration Coupons

Documents or certificates that allow the holder to purchase a certain amount of a product, used especially during shortages to ensure fair distribution.

Government-mandated Increase

A requirement imposed by the government that results in a rise, often relating to wages, prices, or taxes.