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.

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Definitions:

Racial Equality

The state or condition in which individuals are treated equally regardless of their race, ensuring equal opportunities and protections under the law.

NAACP

The National Association for the Advancement of Colored People (NAACP), is an organization that aims to secure the political, educational, social, and economic equality of rights in order to eliminate race-based discrimination and ensure the health and well-being of all persons.

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Preconceived opinion or bias, often rooted in racism, held by individuals or groups against non-whites without proper knowledge, thought, or reason.

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