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Cost of Equity Radon Homes' current EPS is $6.40. It was $4.13 5 years ago. The company pays out 60% of its earnings as
Cost of Equity Radon Homes' current EPS is $6.40. It was $4.13 5 years ago. The company pays out 60% of its earnings as dividends, and the stock sells for $37. a. Calculate the historical growth rate in earnings. (Hint: This is a 5-year growth period.) Do not round intermediate calculations. Round your answer to two decimal places. % b. Calculate the next expected dividend per share, D1. (Hint: Do = 0.60 ($6.40) = $3.84.) Assume that the past growth rate will continue. Do not round intermediate calculations. Round your answer to the nearest cent. $ c. What is Radon's cost of equity, rs? Do not round intermediate calculations. Round your answer to two decimal places. %
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