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Business has been good for Keystone Control Systems, as indicated by the four-year growth in...

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Accounting

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 $2.34.

a. Determine the compound annual rate of growth in earnings (n = 4). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

23.68

b. Based on the growth rate determined in part a, project earnings for next year (E1). (Do not round intermediate calculations. Round your answer to 2 decimal places.)

2.89

c. Assume the dividend payout ratio is 60 percent. Compute D1. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

1.74

d. The current price of the stock is $22. Using the growth rate (g) from part a and (D1) from part c, compute Ke. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

31.59

e. If the flotation cost is $2.50, compute the cost of new common stock (Kn) using growth rate (g) from part a and dividend (D1) from part c. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

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