Suppose In a Found Ltd. just issued a dividend of $1.52 per share on its common stock. The company paid dividends of $1.20, $1.26, $1.33, and $1.44 per share in the last four years.
If the stock currently sells for $55, 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?