Business has been good for Keystone Control Systems, as indicated by the ten-year growth in earnings per share. The earnings have grown from $1.00 to $1.48.

Determine the compound annual rate of growth in earnings (n = 10).

Based on the growth rate determined in part a, project earnings for next year (E1).

Assume the dividend payout ratio is 50 percent. Compute D1.

The current price of the stock is $14. Using the growth rate (g) from part a and (D1) from part c, compute Ke.

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.