#38:

Business has been good for Keystone Control Systems, as indicated by the six-year growth in earnings per share. The earnings have grown from $1.00 to $1.87. a. Determine the compound annual rate of growth in earnings (n=6). Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. b. Based on the growth rate determined in part a, project earnings for next year (E1). Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. Assume the dividend payout ratio is 25 percent. Compute D1. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. D1 d. The current price of the stock is $12. Using the growth rate (g) from part a and (D1) from part c, compute Ke. Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. e. If the flotation cost is $1.50, compute the cost of new common stock (Kn) using growth rate (g) from part a and dividend (D1) from part C. Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places