Cost of Equity

Radon Homes' current EPS is $$7\mathrm{.}10.$ It was $$3\mathrm{.}51$ five

years ago. The company pays out $50\%$ of its earnings as

dividends, and the stock sells for $$38.$

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, $D_1.$

$($Hint: $D_0=0\mathrm{.}50($$$7\mathrm{.}10)=$$$3\mathrm{.}55.)$ 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, $r_s?$ Do not round

intermediate calculations. Round your answer to two

decimal places.

$\%$