Determine the cost of new common stock

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Reference no: EM131962886

Question: Cost of common stock equity Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for $38.75 The firm expects to pay a $3.31 dividend at the end of the year (2016). The dividends for the past 5 years are shown in the following table:

Year	Dividend per Share
2015	$3.01
2014	$2.81
2013	$2.58
2012	$2.13
2011	$2.06

After underpricing and flotation costs, the firm expects to net $36.04 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

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

Reference no: EM131962886

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