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In 2006 and 2007 Kenneth Cole Productions KCP paid annual dividends of 072. In 2008 KCP paid an annual dividend of 036 and then paid no further dividends through 2012 Suppose KCP was

In 2006 and 2007, Kenneth Cole Productions (KCP) paid annual dividends of $0.72. 
In 2008, KCP paid an annual dividend of $0.36, and then paid no further dividends 
through 2012. Suppose KCP was acquired at the end of 2012 for $15.25 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%.)
b. Does your answer to (a) imply that the market for KCP stock was inefficient in 
2006?

Apr 16 2021 View more View Less

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