Suppose Wacken, Limited, just issued a dividend of $1.59 per share on its common stock. The company paid dividends of $1.25, $1.33, $1.40, and $1.51 per share in the last four years. a. If the stock currently sells for $40, 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 and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. What if you use the geometric average growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Cost of equity b. Cost of equity % %
Suppose Wacken, Limited, just issued a dividend of $1.59 per share on its common stock. The company paid dividends of $1.25, $1.33, $1.40, and $1.51 per share in the last four years. a. If the stock currently sells for $40, 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 and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. What if you use the geometric average growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Cost of equity b. Cost of equity % %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Vijay
Transcribed Image Text:Suppose Wacken, Limited, just issued a dividend of $1.59 per share on its common
stock. The company paid dividends of $1.25, $1.33, $1.40, and $1.51 per share in the last
four years.
a. If the stock currently sells for $40, 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 and enter your answer as a percent rounded to 2 decimal
places, e.g., 32.16.)
a. What if you use the geometric average growth rate? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
a. Cost of equity
b. Cost of equity
%
%
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