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2 weeks ago
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?

▸ No, since the constant dividend growth rate gives a stock estimate of $37.50.

▸ Yes, since the constant dividend growth rate gives a stock estimate greater than $37.50.

▸ No, since the constant dividend growth rate gives a stock estimate greater than $37.50.

▸ 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.
Textbook 
Fundamentals of Corporate Finance
Edition: 2nd
Authors:
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2 weeks ago
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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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This calls for a celebration Person Raising Both Hands in Celebration
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