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Determine average annual dividend growth rate

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Textiles wishes to measure its cost of common stock equity. The? firm'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 years? ago, the dividend was just ?$2.98.

After underpricing and flotation? costs, 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 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, rs?, which should equal the cost of retained? earnings, rr.

d. Using the? constant-growth valuation? model, determine the cost of new common? stock, rn.

Reference no: EM132722378

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