Calculate the historical growth rate in earnings

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Reference no: EM131920334

Cost of Equity

Radon Homes' current EPS is $7.39. It was $3.61 5 years ago. The company pays out 55% of its earnings as dividends, and the stock sells for $30.

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.

Calculate the next expected dividend per share, D1. (Hint: D0 = 0.55($7.39) = $4.06.) Assume that the past growth rate will continue. Do not round intermediate calculations. Round your answer to the nearest cent.

What is Radon's cost of equity, rs? Do not round intermediate calculations. Round your answer to two decimal places.

Reference no: EM131920334

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