Suppose In a Found Ltd. just issued a dividend of $2.79 per share on its common stock. The company paid dividends of $2.30, $2.53, $2.60, and $2.71 per share in the last four years.
If the stock currently sells for $50, what is your best estimate of the company's cost of equity capital using the arithmetic average growth rate in dividends? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))
Cost of equity %
What if you use the geometric average growth rate? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))
Cost of equity %