Suppose Stark Ltd. has just issued a dividend of $2.24 per share on its common stock. The company paid dividends of $1.80, $1.98, $2.05, and $2.16 per share over the past four years.

If the shares currently sell for $45, what is your best estimate of the company's cost of equity using the arithmetic average growth rate of dividends?

What happens if you use the geometric average growth rate?

Answer rating: 100% (QA)

Lets estimate the companys cost of equity using the arithmetic average growth rate of dividends D... View the full answer