Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is...
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Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for 72.54$. The firm just recently paid a dividend of 4.06$. The firm has been increasing dividends regularly. Five years ago, the dividend was just 2.96$.
After underpricing and flotation costs, the firm expects to net 66.01$ 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, , which should equal the cost of retained earnings, .
d.Using the constant-growth valuation model, determine the cost of new common stock, . Question content area bottom Part 1 a.The average annual dividend growth rate over the past 5 years is %. (Round to two decimal places.)
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