Sam's Fine Garments sells jackets and sports coats in suburban malls throughout the country. Business has been good, as indicated by the ten-year growth in earnings per share. The earnings have grown from $1.00 to $3.39. (Use a Financial calculator to arrive at the answers.)
a. Determine the compound annual rate of growth in earnings (n=10). Use Appendix A (Round the final answer to 2 decimal places.) Compound annual rate of growth
b. Based on the growth rate determined in part a, project earnings for next year (E) (Round compound annual rate of growth to 2 decimal places. Round the final answer to 2 decimal places.)
c. Assume the dividend payout ratio is 35 percent. Compute Dy (Round intermediate calculations to 2 decimal places. Round the final answer to 2 decimal places.)
d. The current price of the stock is $25. Using the growth rate (g) from part a and Dyfrom part c compute Ke (Round compound annual rate of growth to 2 decimal places. Round the final answer to 2 decimal places.)
e. If the flotation cost is $2.50, compute the cost of new common stock (K (Round compound annual rate of growth to 2'Becimal places. Round intermediate calculations to 2 decimal places. Round the final answer to 2 decimal places.)