Problemradon homess current eps is 625 it was 388 5 years, Ask an Expert

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Problem:

Radon Homes's current EPS is $6.25. It was $3.88 5 years ago. The company pays out 55% of its earnings as dividends, and the stock sells for $34.

Requirement:

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 (Hint: D0 = 0.55($6.25) = $3.44). Assume that the past growth rate will continue.

c) What is Radon's cost of equity, rs? Justify your answer with the appropriate computations.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91146533

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