Suppose Wacken, Limited, just issued a dividend of $2.73 per share on its common stock. The company paid dividends of $2.31, $2.39, $2.48, and $2.58 per share in the last four years. a. If the stock currently sells for $43, 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.) b. 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.) % a. Cost of equity b. Cost of equity

Suppose Wacken, Limited, just issued a dividend of $2.73 per share on its common stock. The company paid dividends of $2.31, $2.39, $2.48, and $2.58 per share in the last four years. a. If the stock currently sells for $43, 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.) b. 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.) % a. Cost of equity b. Cost of equity

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 8P

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