Cost of common stock equity Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for $44.36. The firm just recently paid a dividend of

$4.06 The firm has been increasing dividends regularly. Five years ago, the dividend was just

$2.98. After underpricing and flotation costs, the firm expects to net $39.48

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,

rs, rs, which should equal the cost of retained earnings, rr .

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

rn.

r Subscript srs, which should equal the cost of retained earnings, r Subscript rrr.

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

r Subscript nrn.