S14-04 Estimating the DCF Growth Rate [LO1]

Suppose In a Found Ltd. just issued a dividend of $1.69 per share on its common stock. The company paid dividends of $1.35, $1.43, $1.50, and $1.61 per share in the last four years.

If the stock currently sells for $50, what is your best estimate of the companys cost of equity capital using the arithmetic average growth rate in dividends? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

Cost of equity %

What if you use the geometric average growth rate? (Do not round intermediate calculation and round your answer to 2 decimal places. (e.g., 32.16))

Cost of equity