A company's EPS was $6.50 in 2005, up from $4.42 in 2000. The company pays out 40%
Of its earnings in dividends, and its common stock sells for $36.

Calculate the past growth rate in earnings(This is a 5 year growth period).

growth rate in earning
arithmetic means = 9.41%/yr
geometric means = 8.02%/yr
dividend in 2005 = 6.5 x 40%
market price = 36
cost of retained earning in 2005= 2.6/36 + 8.02%=15.24% (if estimated growth calculated by using geometric means )