Problemsuppose in a found ltd just issued a dividend of 215, Ask an Expert

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Problem

Suppose In a Found Ltd. just issued a dividend of $2.15 per share on its common stock. The company paid dividends of $1.75, $1.89, $1.96, and $2.07 per share in the last four years.

Task:

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 all calculation and formulas.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91172718

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