A4 8f 8. ABC Co. has the following dividend payment history for the last five years, with the most recent dividend being $1.10: $0.50, $0.60, $0.80, $1.00, $1.10. Expected growth rate of dividends by...

A4 8f

8.       ABC Co. has the following dividend payment history for the last five years, with the
most recent
dividend being $1.10: $0.50, $0.60, $0.80, $1.00, $1.10.

Expected growth rate of dividends by averaging the growth rates:

Average growth rate is 20.55%

Average growth rate = (17.08% + 22.08%+ 22.50%) /3

Average growth rate = 20.55%

Dividend growth model

f. ABC’s share price is currently $70, and the most recent dividend paid is $1.10 per share. Using the expected growth rate estimated in, calculate the cost of equity using the dividend growth model.