Equity capital using arithmetic and geometric growth rates

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Reference no: EM132009097

Suppose Powers Ltd. just issued a dividend of $2.56 per share on its common stock. The company paid dividends of $2.06, $2.13, $2.30, and $2.40 per share in the last four years.

Required:

If the stock currently sells for $75, what is your best estimate of the company’s cost of equity capital using arithmetic and geometric growth rates? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)

Cost of equity

Arithmetic dividend growth rate %

Geometric dividend growth rate %

Reference no: EM132009097

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