Using the constant-growth valuation model

Assignment Help Financial Management

Reference no: EM132052741

Cost of common stock equity

Assume that today is January 1, 2013. Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for $55.69. The firm expects to pay a $1.67 dividend at the end of the year (2013). The growth rate of the dividends is 7.46%. After underpricing and flotation? costs, the firm expects to net $49.56 per share on a new issue.

a. Using the constant-growth valuation model, determine the cost of retained earnings, r Subscript s.

b. Using the constant-growth valuation model, determine the cost of new common stock, r Subscript n

Reference no: EM132052741

Questions Cloud

Summarizes prices of various default-free-zero-coupon bonds : The following table summarizes prices of various default-free, zero-coupon bonds (expressed as a percentage of face value):

The stock has more systematic risk than the overall market : The stock has the same systematic risk as the overall market. The stock has more systematic risk than the overall market.

Insurer financial strength affect its need for reinsurance : How does an insurer’s financial strength affect its need for reinsurance?

Insurance sold affect the need for reinsurance : How does the type of insurance sold affect the need for reinsurance? Which types of insurers are more likely to need reinsurance?

Using the constant-growth valuation model : Using the constant-growth valuation model, determine the cost of retained earnings, r Subscript s.

Primary goal of chief financial officer of corporation be : From a finance perspective, what should the primary goal of the Chief Financial Officer (CFO) of the corporation be?

Weighted average cost of capital for this firm : If the corporate tax rate is 31%, what is the Weighted Average Cost of Capital (WACC) for this firm?

Cash flows for capital budgeting projects : Which of the following is should not be included in cash flows (CFFA) for capital budgeting projects?

What is the percent market value of debt for this firm : What is the percent market value of debt for this firm?

User Account

All Pages