Cost of Equity

Radon Homes' current EPS is $$7\mathrm{.}60.$ It was $$4\mathrm{.}95$ five years ago. The company pays out $60\%$ of its earnings as dividends, and the stock sells for $$33.$

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.

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Calculate the next expected dividend per share, D$1.($Hint: D$0=0\mathrm{.}60($$$7\mathrm{.}60)=$ $$4\mathrm{.}56.)$ Assume that the past growth rate will continue. Do not round intermediate calculations. Round your answer to the nearest cent.

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What is Radon's cost of equity, rs$?$ Do not round intermediate calculations. Round your answer to two decimal places.

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