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Geometric average growth rate

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Suppose Stark 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.

If the stock currently sells for $55, what is your best estimate of the companyâs cost of equity capital using the arithmetic average growth rate in dividends? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Cost of equity %

What if you use the geometric average growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Cost of equity %

Reference no: EM131478396

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