Cost of equitySuppose Stark Ltd. just issued a dividend of $1.73 per share on its common stock. The company paid dividends of $1.40, $1.47, $1.54, and $1.65 per share in the last four years.

If the stock currently sells for $60, what is your best estimate of the companys cost of equity capital using the arithmetic average growth rate in dividends?

Cost of equity

%

What if you use the geometric average growth rate?

Cost of equity

%