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Cost of Equity Radon Homes' current EPS is $7.40. It was $4.80 5 years ago....

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Finance

Cost of Equity

Radon Homes' current EPS is $7.40. It was $4.80 5 years ago. The company pays out 50% of its earnings as dividends, and the stock sells for $32.

  1. 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. %
  2. Calculate the next expected dividend per share, D1. (Hint: D0 = 0.50($7.40) = $3.70.) Assume that the past growth rate will continue. Do not round intermediate calculations. Round your answer to the nearest cent. $
  3. What is Radon's cost of equity, rs? Do not round intermediate calculations. Round your answer to two decimal places. %

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