Problemsuppose in a found ltd just issued a dividend of 233, Ask an Expert

Accounting

Problem:

Suppose In a Found Ltd. just issued a dividend of $2.33 per share on its common stock. The company paid dividends of $2.00, $2.08, $2.15, and $2.26 per share in the last four years.

Required:

Question 1: If the stock currently sells for $55, 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: Please provide through step by step calculations.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167311

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