Question 6:

Cost of Equity Radon Homes' current EPS is $7.00. It was $4.26 5 years ago. The company pays out 30% of its earnings as dividends, and the stock sells for $33. 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. (Hint: Do = 0.30($7.00) = $2.10.) 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. %