Assume that today is January 1, 2013. Ross textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for $57.37. The firm expects to pay $3.44 dividend at the end of the year (2013). The growth rate of dividends is 8.42%. After underpricing and flotation costs, the firm expect to net $52.78 per share on a new issue.

a. Using the constant-growth valuation model determine the cost of retained earnings rs.

b. Using the constant-growth valuation model determine the cost of new commone stock rn.