Cost of Equity

Radon Homes' current EPS is $$6\mathrm{.}46.$ It was $$4\mathrm{.}125$ years ago. The company pays out $40\%$ of its earnings as dividends, and the stock sells for $$32.$

Calculate the historical growth rate in earnings. $($Hint: This is a $5-$year growth period.$)$ Round your answer to two decimal places.

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Calculate the next expected dividend per share, D$1($Hint: D$0=0\mathrm{.}40($$$6\mathrm{.}46)=$ $$2\mathrm{.}58).$ Assume that the past growth rate will continue. Round your answer to the nearest cent.

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$2\mathrm{.}91$

What is Radon's cost of equity, rs$?$ Round your answer to two decimal places.

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