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:

Men

Refers to adult human males, often discussed in studies related to gender differences, social roles, or demographic analysis.

Sampling Distribution

Distribution of statistics for samples randomly drawn from populations.

Sample Means

The arithmetic average of a set of values taken from a larger population, used in statistics to estimate the population mean.

Population Mean

Mean associated with an entire population.