Suppose Cap Ltd. just issued a dividend of $1.88 per share on its common stock. The company paid dividends of $1.50, $1.62, $1.69, and $1.80 per share in the last four years.

If the stock currently sells for $65, 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. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What if you use the geometric average growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Full question:

The above answers in the box are correct. However, I am not sure how to get the Geometric Average Growth rate for the second part.

Question 2 (of 10) value: 10.00 points Problem 14-4 Estimating the DCF Growth Rate [LO1] Suppose Cap Ltd. just issued a dividend of $1.88 per share on its common stock. The company paid dividends of $1.50, $1.62, $1.69, and $1.80 per share in the last four years. If the stock currently sells for $65, 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. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity 8.88 % What if you use the geometric average growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity 8.86 % References eBook& Resources Worksheet Difficulty: Basic Problem 14-4 Estimating theLearning Objective: 14-01 How to DCF Growth Rate [LO1] determine a firms cost of equity capital