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:

Suicide

The act of intentionally causing one's own death, often as a response to distress, mental illness, or a sense of despair.

Dissociative Amnesia

Dissociative disorder characterized by extreme memory loss that is caused by extensive psychological stress.

Dissociative Identity Disorder

A severe form of dissociation, a mental disorder characterized by the presence of two or more distinct personality states or identities controlling an individual's behavior at different times.

Distinction

A difference or contrast between similar things or people, often used to categorize or evaluate quality.