Question
Radon Homes' current EPS is $6.40. It was $4.64 5 years ago. The company pays out 60% of its earnings as dividends, and the stock
Radon Homes' current EPS is $6.40. It was $4.64 5 years ago. The company pays out 60% of its earnings as dividends, and the stock sells for $34.
1. 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 pla.
%
2. Calculate the next expected dividend per share, D1. (Hint: D0 = 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
$
3. What is Radon's cost of equity, rs? Do not round intermediate calculations. Round your answer to two decimal places.
%
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