Use the geometric average growth rate

Assignment Help Financial Management

Reference no: EM13937113

Suppose Stark Ltd. just issued a dividend of $2.14 per share on its common stock. The company paid dividends of $1.80, $1.89, $1.96, and $2.07 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: EM13937113

Questions Cloud

Risk and return-coefficient of variation : Risk and Return, Coefficient of Variation. Based on the following information, calculate the coefficient of variation and select the best investment based on the risk/reward relationship: Std Dev. Exp. Return Company A 10.4 13.2 Company B 7.6 8.7

Construct a pro forma income statement : Construct a pro forma income statement for the first year and second year for the following assumptions: Units of Sales in Year 1: 110,000 Price per Unit: $11 Variable cost per unit: 25% Fixed Costs: $129,000 Income taxes: 20% Interest Expense: $170,..

Risk-free interest rate from now until options maturity date : You buy a share of stock, write a one-year call option with a strike price X = $28, and buy a one-year put option with a strike price X = $28. Your net initial cost to establish the entire portfolio is $26.70. What must be the risk-free interest rate..

A stock has an expected return-market risk premium : A stock has an expected return of 16.1 percent, the risk-free rate is 6.45 percent, and the market risk premium is 7.2 percent. What must the beta of this stock be?

Use the geometric average growth rate : Suppose Stark Ltd. just issued a dividend of $2.14 per share on its common stock. The company paid dividends of $1.80, $1.89, $1.96, and $2.07 per share in the last four years? If the stock currently sells for $60, what is your best estimate of the c..

Domestic wastewater treatment : Domestic Wastewater treatment using vermin-bio filtration

Silver ion concentration : Silver ion concentration changes over the filter bed depths

Report to the chairman : Write a report to the Chairman or Managing Director of a Company regarding review of its Governance Structure

Why did knut need to introduce the new performance measures : Why did Knut need to introduce these new performance measures? That is, why does he need to use these performance measures over and above the operating profit numbers for the period?

User Account

All Pages