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

question 22

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.
• E)Yes,since the constant dividend growth rate gives a stock estimate less than $37.50.

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Definitions:

Decision-Making Process

The systematic steps taken by individuals or groups to choose the best action from among various alternatives.

CISG

The United Nations Convention on Contracts for the International Sale of Goods, a treaty that establishes a uniform framework for international commerce.

Globalized New World Order

A concept or perspective on the shifting dynamics of global power, economics, and politics towards increased interconnectedness and homogenization across countries and cultures, often discussed with both positive and negative connotations.

Nation-State

A sovereign entity characterized by a defined territory, permanent population, a government, and the capacity to enter into relations with other states.