Estimate of the company cost of equity capital, Accounting Basics

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Estimate of the company cost of equity capital

Problem:

Suppose In a Found Ltd. just issued a dividend of $1.73 per share on its common stock. The company paid dividends of $1.40, $1.47, $1.54, and $1.65 per share in the last four years.

Requirement:

Question 1: If the stock currently sells for $60, what is your best estimate of the company's cost of equity capital using the arithmetic average growth rate in dividends?

Question 2: What if you use the geometric average growth rate?

Note: Explain in detail and show all computations in proper way.

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Accounting Basics: Estimate of the company cost of equity capital

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Accounting Basics: Estimate of the company cost of equity capital

Reference No:- TGS0892132

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Ask an Expert for Answer!!

Accounting Basics: Estimate of the company cost of equity capital

Reference No:- TGS0892132

Recent Questions Asked Accounting Basics

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