Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for

$40.1840.18. The firm just recently paid a dividend of $3.973.97. The firm has been increasing dividends regularly. Five years ago, the dividend was just $3.013.01. After underpricing and flotation costs, the firm expects to net $36.9736.97 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, 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.