Business has been good for Keystone Control Systems, as indicated by the thirteen-year growth in earnings per share. The earnings have grown from $1.00 to $2.41.

  

a.

Determine the compound annual rate of growth in earnings (n = 13). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

  

  Compound 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 30 percent. Compute D1. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  

  D1$   

  

d.

The current price of the stock is $22. Using the growth rate (g) from part a and D1 from part c, compute Ke. (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 (Kn) 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.)

  

  Kn

 %  

 

    • 7 years ago
    A++ ANSWER
    NOT RATED

    Purchase the answer to view it

    blurred-text
    • attachment
      keystone_control_systems.docx