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 %