Textiles wishes to measure its cost of common stock equity. Thefirm's stock is currently selling for $66.78. The firm just recently paid a dividend of $3.95. The firm has been increasing dividends regularly. Five yearsago, the dividend was just $2.98.

After underpricing and flotationcosts, the firm expects to net $58.10 per share on a new issue.

a. Determine average annual dividend growth rate over the past 5 years. Using that growthrate, what dividend would you expect the company to pay nextyear?

b. Determine the netproceeds, Nn, that the firm will actually receive.

c. Using theconstant-growth valuationmodel, determine the required return on thecompany's stock, rs, which should equal the cost of retainedearnings, rr.

d. Using theconstant-growth valuationmodel, determine the cost of new commonstock, rn.

All the information is there.