Suppose Nightwish, Limited, just issued a dividend of $1.93 per share on its common stock. The company paid dividends of $1.60, $1.68, $1.75, and $1.86 per share in the last four years.
If the stock currently sells for $50, what is your best estimate of the company’s cost of equity capital using the arithmetic average growth rate in dividends?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
What if you use the geometric average growth rate?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.