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Cost of common stock equity Ross Textiles wishes to measure its cost of common stock...

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Finance

Cost of common stock equity Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for

$45.49. The firm just recently paid a dividend of $4.11. The firm has been increasing dividends regularly. Five years ago, the dividend was just $3.05.

After underpricing and flotation costs, the firm expects to net $41.85 per share on a new issue.

a.Determine average annual dividend growth rate over the past 5 years. Using that growth rate, what dividend would you expect the company to pay next year?

b. Determine the net proceeds, Nn, that the firm will actually receive.

c.Using the constant-growth valuation model, determine the required return on the company's stock, rs,

which should equal the cost of retained earnings, rr.

d.Using the constant-growth valuation model, determine the cost of new common stock, rn.

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