Sams Fine Garments sells jackets and sports coats in suburban malls throughout the country. Business has been good, as indicated by the eleven-year growth in earnings per share. The earnings have grown from $1.00 to $3.83. (Use a Financial calculator to arrive at the answers.)

a. Determine the compound annual rate of growth in earnings (n = 11). Use Appendix A. (Round the final answer to 2 decimal places.)

Compound annual rate of growth %

b. Based on the growth rate determined in part a, project earnings for next year (E₁). (Round compound annual rate of growth to 2 decimal places. Round the final answer to 2 decimal places.)

E₁ $

c. Assume the dividend payout ratio is 10 percent. Compute D₁. (Round intermediate calculations to 2 decimal places. Round the final answer to 2 decimal places.)

D₁ $

d. The current price of the stock is $13. Using the growth rate (g) from part a and D₁ from part c, compute K_e. (Round compound annual rate of growth to 2 decimal places. Round the final answer to 2 decimal places.)

K_e %

e. If the flotation cost is $1.75, compute the cost of new common stock (K_n). (Round compound annual rate of growth to 2 decimal places. Round intermediate calculations to 2 decimal places. Round the final answer to 2 decimal places.)

K_n %