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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 ?$69.13. The firm expects to pay a ?$3.37 dividend at the end of the year? (2016). The dividends for the past 5 years are shown in the following? table: ?
2015 ?$3.06
2014 ?$2.89
2013 ?$2.38
2012 ?$2.21
2011 ?$2.09
After underpricing and flotation? costs, the firm expects to net ?$60.83 per share on a new issue.
a. Determine the growth rate of dividends from 2011 to 2015.
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, r Subscript srs.
d. Using the? constant-growth valuation? model, determine the cost of new common? stock, r Subscript nrn.
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