What is the best estimate of the companys cost of equity
Course:- Financial Econometrics
Reference No.:- EM13333881

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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.

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?

What if you use the geometric average growth rate?

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