Determine the compound annual rate of growth in earnings

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Reference no: EM1350220

Business has been good for Keystone Control Systems, as indicated by the four-year growth in earnings per share. The earnings have grown from $1.00 to $1.63.

a. Determine the compound annual rate of growth in earnings (n = 4)

b. Based on the growth rate determined in part a, project earnings for next year.

c. Assume the dividend payout is 40%. Compute D with "tiny one"
Round to two places to the right of the decimal point

d. The current price of the stock is $50. Using growth rate (g) from part
a and (D1) from part c, compute K with tiny

e. If the flotation cost is $3.75, compute the cost of new common stock (K with tiny n)

Reference no: EM1350220

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