Question
In 2006 and2007, Kenneth Cole Productions(KCP) paid annual dividends of $0.67. In2008, KCP paid an annual dividend of $0.39, and then paid no further dividends
In 2006 and2007, Kenneth Cole Productions(KCP) paid annual dividends of $0.67. In2008, KCP paid an annual dividend of $0.39, and then paid no further dividends through 2012. Suppose KCP was acquired at the end of 2012 for $14.78 per share.
a. What would an investor with perfect foresight of the above been willing to pay for KCP at the start of2006? (Note: Because an investor with perfect foresight bears norisk, use arisk-free equity cost of capital of 4.9%.)
b. Does your answer to (a) imply that the market for KCP stock was inefficient in2006?
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The Legal Environment Today Summarized Case Edition
Authors: Roger LeRoy Miller
8th Edition
130526276X, 978-1305279407, 1305279409, 978-1305704930, 1305704932, 978-1305262768
