Radon Homes current EPS is $6.50. It was $4.42 5 years ago. The company pays out 40% of its earnings as dividends, and the stock sells for $36.

a. Calculate the historical growth rate in earnings. (Hint: This is a 5-year growth period.)

b. Calculate the next expected dividend per share, D1. (Hint: D0 5 0.4($6.50) 5 $2.60.) Assume that the past growth rate will continue.

c. What is Radons cost of equity, rs ?

Brigham, Eugene F.; Ehrhardt, Michael C.. Financial Management: Theory & Practice (MindTap Course List) (p. 406). Cengage Learning. Kindle Edition.