Problem $14-4$ Estimating the DCF Growth Rate $[$LO$1]$

Suppose Nightwish. Limited, just issued a dividend of $$2\mathrm{.}33$ per share on its common stock. The company paid dividends of $$2\mathrm{.}00,$ $$2\mathrm{.}08,$$$2\mathrm{.}15,$ and $$2\mathrm{.}26$ per share in the last four years.

a$.$ If the stock curtently sells for $$55,$ what is your best estimate of the company's cost of equity capital using the arithmetic average growth rate in dividends?

b$.$ What if you use the geometric average growth rate?