• n 2006 and 2007, Kenneth Cole Productions (KCP) paid annual dividends of

  $0.69.

  In 2008, KCP paid an annual dividend of

  $0.37,

  and then paid no further dividends through 2012. Suppose KCP was acquired at the end of 2012 for

  $14.68

  per share.a. What would an investor with perfect foresight of the above been willing to pay for KCP at the start of 2006?

  (Note:

  Because an investor with perfect foresight bears no risk, use a risk-free equity cost of capital of

  5.2%.)

  b. Does your answer to

  (a)

  imply that the market for KCP stock was inefficient in 2006?