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Determine the cost of retained earnings

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Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for $57.50. The firm expects to pay a $3.40 dividend at the end of 2013. The dividends for the past 5 years are shown as following:

Year 2008 2009 2010 2011 2012

Dividend .$2.12 . $2.30 . $2.60 . $3.92 . $3.10

After underpricing and flotation costs, the firm expects to net $52 per share. Using the constant growth valuation model, determine (1) the cost of retained earnings, rr , and (2) the cost of new common stock, rn

Reference no: EM132125163

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