Business has been good for Keystone Control Systems, as indicated by the eleven-year growth in earnings per share. The earnings have grown from $1.00 to $5.13 & Determine the compound annual rate of growth in eamings (n=11). (Do not round Intermediate calculations. Input your answer as a percent rounded to 2 decimal places) 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.) E1 c. Assume the dividend payout ratio is 20 percent. Compute D₁. (Do not round intermediate calculations. Round your answer to 2 decimal places.) D1 16.13 % d. The current price of the stock is $20. Using the growth rate (g) from part a and (D₁) from part c, compute K (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Ke % e. If the flotation cost is $3.00, compute the cost of new common stock (K) using growth rate (g) from part a and dividend (D₂) from part c. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Complete b-e please a is already complete.

Business has been good for Keystone Control Systems, as indicated by the eleven-year growth in earnings per share. The earnings
have grown from $100 to $5.13.
a. Determine the compound annual rate of growth in eamings (n=11). (Do not round intermediate calculations. Input your answer as
a percent rounded to 2 decimal places)
Compsund annual rate of growth
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.)
E1
c. Assume the dividend payout ratio is 20 percent. Compute D₁. (Do not round intermediate calculations. Round your answer to 2
decimal places.)
D1
16.13 %
d. The current price of the stock is $20. Using the growth rate (g) from part a and (D₁) from part c, compute K (Do not round
intermediate calculations. Input your answer as a percent rounded to 2 decimal places.]
E
%
e. If the flotation cost is $3.00, compute the cost of new common stock (K) 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.)
%
Prov
7 of 10
12721
FRE
Next >
Transcribed Image Text:Business has been good for Keystone Control Systems, as indicated by the eleven-year growth in earnings per share. The earnings have grown from $100 to $5.13. a. Determine the compound annual rate of growth in eamings (n=11). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places) Compsund annual rate of growth 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.) E1 c. Assume the dividend payout ratio is 20 percent. Compute D₁. (Do not round intermediate calculations. Round your answer to 2 decimal places.) D1 16.13 % d. The current price of the stock is $20. Using the growth rate (g) from part a and (D₁) from part c, compute K (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.] E % e. If the flotation cost is $3.00, compute the cost of new common stock (K) 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.) % Prov 7 of 10 12721 FRE Next >
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