O'Neal's Men's Shops, Inc., specializes in large-size clothing. Business has been good, as indicated by the six-year

Question:

O'Neal's Men's Shops, Inc., specializes in large-size clothing. Business has been good, as indicated by the six-year growth in earnings per share. The earnings have grown from $1.00 to $1.87.

a. Use Appendix A at the back of the text to determine the compound annual rate of growth in earnings (n = 6).

b. Based on the growth rate determined in part a, project earnings for next year (E1). (Round to two places to the right of the decimal point.)

c. Assume the dividend payout ratio is 40 percent. Compute (D1). (Round to two places to the right of the decimal point.)

d. The current price of the stock is $18. Using the growth rate (g) from part a and D 1 from part c, compute K e .

e. If the flotation cost is $1.50, compute the cost of new common stock (Kn).

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...