Cost of common stock equity - Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for $67.85. The firm just recently paid a dividend of $3.97. The firm has been increasing dividends regularly. Five years ago, the dividend was just $3.03.

After underpricing and flotation costs, the firm costs, the firm expects the net $63.10 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, N_n, that the firm will actually receive.

c. using the constant - growth valuation model, determine the required return on the company's stock, r_s, which should equal the cost of retained earnings, r_r.

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