Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. business has been good for keystone control system

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

70.2K

Verified Solution

Question

Accounting

Business has been good for Keystone Control Systems, as indicated by the four-year growth in earnings per share. The earnings have grown from $1.00 to $2.34.

a. Determine the compound annual rate of growth in earnings (n = 4). (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 30 percent. Compute D1. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

d. The current price of the stock is $11. 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 $2.00, 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.)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students