On a Certain Date,Hasbro Has a Stock Price of $37

question 36

Multiple Choice

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

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

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Definitions:

Chess And Thomas

Researchers known for their temperament classification system, which categorizes children's behaviors and reactions into three primary types.

Temperament

an individual's inherent personality traits, including their tendency towards emotional reactivity, introversion or extroversion, and adaptability to change.

Resistant

Describes an opposition or inability to accept or go along with something; in a physical context, it relates to a material's ability to resist or withstand an applied force.

Persistent Emotion

A long-lasting emotional state that might influence someone's behavior and perception over an extended period.