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.

---

Definitions:

Brain Damage

Injury or destruction of brain cells that impairs brain function, possibly resulting from trauma, disease, or other health conditions.

Prefrontal Cortex

The front part of the frontal lobes of the brain, crucial for complex cognitive behavior, personality expression, decision making, and moderating social behaviour.

Deficits

Situations where a shortfall exists, often referring to financial matters where expenses exceed revenue, but can also apply to other areas such as cognitive deficits in psychology.

Damaged

Refers to items or entities that are impaired, harmed, or rendered less effective.