Cost of Equity

Radon Homes' current EPS is $7.10. It was $5.00 5 years ago. The company pays out 40% of its earnings as dividends, and the stock sells for $37.

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. %

Calculate the next expected dividend per share, D1. (Hint: D0 = 0.40($7.10) = $2.84.) Assume that the past growth rate will continue. Do not round intermediate calculations. Round your answer to the nearest cent. $

What is Radon's cost of equity, rs? Do not round intermediate calculations. Round your answer to two decimal places. %