Top Posters
Since Sunday
5
o
5
4
m
4
b
4
x
4
a
4
l
4
t
4
S
4
m
3
s
3
New Topic  
kaarnold98 kaarnold98
wrote...
Posts: 496
4 years 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

Fundamentals of Corporate Finance


Edition: 2nd
Authors:
Read 140 times
2 Replies
Replies
Answer verified by a subject expert
lindslinds
wrote...
Posts: 386
4 years ago
Sign in or Sign up in seconds to unlock everything for free
More solutions for this book are available here
1

Related Topics

kaarnold98 Author
wrote...
4 years ago
This calls for a celebration Person Raising Both Hands in Celebration
New Topic      
Explore
Post your homework questions and get free online help from our incredible volunteers
  746 People Browsing
 113 Signed Up Today
Related Images
  
 67
  
 262
  
 757
Your Opinion
Which country would you like to visit for its food?
Votes: 204

Previous poll results: What's your favorite coffee beverage?