Determine the growth rate of dividends

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Reference no: EM131962794

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 $56.28. The firm expects to pay a $3.27 dividend at the end of the year? (2016). The dividends for the past 5 years are shown in the following table:

(Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)

Year	Dividend per Share
2015	?$2.982.98
2014	?$2.822.82
2013	?$2.462.46
2012	?$2.232.23
2011	?$2.05

After underpricing and flotation costs, the firm expects to net $51.78 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.

Reference no: EM131962794

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