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Cost of common stock equity Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for $57.50. 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 $57.50. The firm expects to pay a $3.40 dividend at the end of the year (2013). The dividends for the past 5 years are shown in the following table. Year Dividend 2012 2011 2010 2009 2008 $3.10 2.92 2.60 2.30 2.12 After underpricing and flotation costs, the firm expects to net $52 per share on a new issue. a. Determine the growth rate of dividends from 2008 to 2012. b. Determine the net proceeds, N, that the firm will actually receive. c. Using the constant-growth valuation model, determine the cost of retained earn- ings, ry d. Using the constant-growth valuation model, determine the cost of new common stock, rn
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