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Problem: Suppose In a Found Ltd. just issued a dividend of $1.92 per share on its common stock. The company paid dividends of $1.50, $1.65, $1.72, and $1.83 per share in the last four years.

Required:

Question 1: If the stock currently sells for $40, 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 the solution in detail.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91174821

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