Problem:
Suppose Powers Ltd. just issued a dividend of $2.57 per share on its common stock. The company paid dividends of $2.07, $2.14, $2.31, and $2.41 per share in the last four years.
Required:
If the stock currently sells for $76, what is your best estimate of the company's cost of equity capital using arithmetic and geometric growth rates?
Note: Explain all steps comprehensively.