Cost of Equity

Radon Homes's current EPS is $7.10. It was $3.85 5 years ago. The company pays out 40% of its earnings as dividends, and the stock sells for $30.

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

Calculate the next expected dividend per share, D1 Assume that the past growth rate will continue. Round your answer to the nearest cent. (Hint: D0 = 0.40($7.10) = $2.84). $ ____

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

_____%