Radon Homes' current EPS is $6.46. It was $4.89 five years ago. The company pays out 30% of its earnings as dividends, and the stock sells for $33.
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. Assume that the past growth rate will continue.
c. What is Radon Homes' cost of equity, rs?