Radon Homes current EPS is $6.50. It was $4.42 five 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.) show all work and formulas to support answer
(b) Calculate the next expected dividend per share D1. (Hint Do = 0.4 ($6.50) = $2.60.) Assume that the past growth rate will continue. show all work and formulas
(c) What is Radon's cost of equity, rs? show all work and formulas.