Question

# Business has been good for Keystone Control Systems, as indicated by the eleven-year growth in earnings...

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 \$1.71.
a. Determine the compound annual rate of growth in earnings (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.)
c.
Assume the dividend payout ratio is 45 percent. Compute D1. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
d.
The current price of the stock is \$16. 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..)
e.
If the flotation cost is \$1.50, 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.) #### Earn Coins

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