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What if you use the geometric average growth rate

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Reference no: EM131318195

Cost of equitySuppose Stark Ltd. just issued a dividend of $1.73 per share on its common stock. The company paid dividends of $1.40, $1.47, $1.54, and $1.65 per share in the last four years.

  • If the stock currently sells for $60, 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?

Reference no: EM131318195

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