P9-10 Cost of common stock equity Ross Textiles wishes to measure its cost of common...
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P9-10 Cost of common stock equity Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for $70.67. The firm just recently paid a dividend of $4. The firm has been increasing dividends regularly. Five years ago, the dividend was just $2.99. After underpricing and flotation costs, the firm expects to net $69 per share on a new issue. a. Determine average annual dividend growth rate over the past 5 years. Report your answer to the nearest whole percentage. Using that growth rate, what divi- dend would you expect the company to pay next year? b. Determine the net proceeds, N, that the firm will actually receive. E. 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. 1. Using the constant-growth valuation model, determine the cost of new common stock
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