On a Certain Date, Harvey Norman Has a Share Price

question 34

Multiple Choice

On a certain date, Harvey Norman has a share 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 the Harvey Norman shares that he owns. Given Harvey Norman's share price, was this a reasonable action?

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

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Definitions:

Landfills

Sites designated for the disposal of waste material by burying it, often considered the least environmentally friendly method of waste management.

Commercial Harvest

The collection of commercially important organisms from the wild. Examples include the commercial harvest of parrots (for the pet trade) and cacti (for houseplants).

Foreign Species

Species that are introduced into a habitat where they are not natively found, often causing ecological disruption.

Endemic Species

Species that are native to and found only within a specific geographic area, often isolated by natural boundaries.