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AccountingQ&A LibrarySuppose Stark Ltd. just issued a dividend of $2.08 per share on its common stock. The company paid dividends of $1.75, $1.82, $1.89, and $2.00 per share in the last four years. a. 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? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. What if you use the geometric average growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Start your trial now! First week only $4.99!*arrow_forward*

Question

Suppose Stark Ltd. just issued a dividend of $2.08 per share on its common stock. The company paid dividends of $1.75, $1.82, $1.89, and $2.00 per share in the last four years. |

a. |
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? |

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

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