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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

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 (2015). The dividends for the past 5 years are shown in the following table.

Year Dividend
2014 3.9
2013 3.4
2012 3.3
2011 3
2010 2.8

After underpricing and flotation costs, the firm expects to net $52 per share on a new issue. a Determine the growth rate of dividends 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, rr d Using the constant-growth valuation model, determine the cost of new common stock, rn

Group of answer choices

a - the average growth rate of dividends is 5% from year to year

b - net proceeds is $42 per share

c - the cost of retained earnings is approximately 26.6%

d - the cost of new common stock is 6.5%

a - the average growth rate of dividends is 15.7% from year to year

b - net proceeds is $32 per share

c - the cost of retained earnings is approximately 6.6%

d - the cost of new common stock is 8.5%

a - the average growth rate of dividends is 4.7% from year to year

b - net proceeds is $25 per share

c - the cost of retained earnings is approximately 14.6%

d - the cost of new common stock is 12.5%

a - the average growth rate of dividends is 8.7% from year to year

b - net proceeds is $52 per share

c - the cost of retained earnings is approximately 14.6%

d - the cost of new common stock is 15.3%

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