Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Chapter 11, Problem 11P

a)

Summary Introduction

To determine: Historical growth rate in earnings.

b)

Summary Introduction

To determine: Next expected dividend.

c)

Summary Introduction

To determine: Cost of equity

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Radon Homes’ current EPS is $6.50. It was $4.42 5 years ago. The company paysout 40% of its earnings as dividends, and the stock sells for $36.a. Calculate the past growth rate in earnings. (Hint: This is a 5-year growthperiod.)b. Calculate the next expected dividend per share, D1 [D0  0.4($6.50)  $2.60].Assume that the past growth rate will continue.c. What is the cost of equity, rs, for Radon Homes?
Radon Homes' current EPS is $6.50. It was $4.42 5 years ago. The company pays out 40% of its earnings as dividends, and the stock sells or $36. a. Calculate the historical growth rate in earnings. (Hint: This is a 5 - yeargrowth period.)b. Calculate the next expected dividend per share, DI . (Hint: DO = o.4($6.50)= $2.60) Assume that the past growth rate will continue.c. What is Radon's cost of equity, rs ?
Radon Homes' current EPS is $6.50. It was $3.65 5 years ago. The company pays out 60% of its earnings as dividends, and the stock sells for $34. a. 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. % b. Calculate the next expected dividend per share, D1. (Hint: Do = 0.60($6.50) = $3.90.) Assume that the past growth rate will continue. Do not round intermediate calculations. Round your answer to the nearest cent. c. What is Radon's cost of equity, rs? Do not round intermediate calculations. Round your answer to two decimal places. %
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