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.) %

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.) %

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 10P

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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.) 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 $20. 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…
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