Cost of common stock equity Ross Textiles wishes to measure its cost of common stock...
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Cost of common stock equity Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for
$57.50. The firm expects to pay a $3.40 dividend at the end of the year (2016). The dividends for the past 5 years are shown in the following table:
| Year | Dividend per Share |
|
| 2015 | $3.10 | |
| 2014 | $2.92 | |
| 2013 | $2.60 | |
| 2012 | $2.30 | |
| 2011 | $2.12 |
After underpricing and flotation costs, the firm expects to net $52.00 per share on a new issue.
a. Determine the growth rate of dividends from 2011 to 2015.
b. Determine the net proceeds that the firm will actually receive.
c.Using the constant-growth valuation model, determine the cost of retained earnings.
d.Using the constant-growth valuation model, determine the cost of new common stock.
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