Question
Cost of common stock equity Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for $38.75 The
Cost of common stock equity Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for $38.75 The firm expects to pay a $3.31 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 | $3.01 |
2014 | $2.81 |
2013 | $2.58 |
2012 | $2.13 |
2011 | $2.06 |
After underpricing and flotation costs, the firm expects to net $36.04 per share on a new issue.
a.Determine the growth rate of dividends from 2011 to 2015.
b. Determine the net proceeds,Nn, 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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