Cost of equity capital using arithmetic average growth rate

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Q1) Federal and state governments mandate and completely fund education at primary and secondary levels whereas just giving subsidies and loan guarantees at collegiate level. Based on understanding of economic rationales for public education, write down the reason for different subsidization treatment between levels of education?

Q2) Assume in a Found Ltd. now issued dividend of $1.69 per share on its common stock. Company paid dividends of $1.35, $1.43, $1.50, and $1.61 per share in the last 4 years.

If stock presently sells for= $50, what is your best estimate of company’s cost of equity capital by using arithmetic average growth rate in dividends?

What if you use geometric average growth rate?

Answer arithmetic and geometric averages in %

Reference no: EM1310521

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