On a Certain Day in February 2008, Hasbro's Forward P/E

question 50

Multiple Choice

On a certain day in February 2008, Hasbro's forward P/E was reported to be 12.56 and its beta was 1.71. The relevant risk-free rate at the time was 3%. Assume that 5% is a reasonable
Equity premium to use. What does this data suggest Hasbro's expected eternal earnings
Growth rate was? Round your answer to the nearest tenth of a percent.

• A)0.4%
• B)11.6%
• C)3.6%
• D)19.6%

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Definitions:

Internal Rate Of Return

The internal rate of return is a financial metric used to evaluate the profitability of investments, calculating the discount rate that makes the net present value of cash flows from an investment equal to zero.

Hurdle Rate

The minimum rate of return on a project or investment required by a manager or investor, often used in capital budgeting to measure investment risk.

Compound Interest Table

A table that shows the amount of compound interest that will be accrued on a principal amount over a period of time at various interest rates.

Salvage Value

The expected end-of-life value of an asset after its useful period has ended.