Problem:
Suppose In a Found 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.
Requirement:
Question 1: 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?
Question 2: What if you use the geometric average growth rate?
Note: Explain in detail and show all computations in proper way.