Question
Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently...
Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for
$36.4136.41.
The firm expects to pay a
$3.263.26
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 |
$2.962.96 |
|
|
2014 |
$2.742.74 |
|
|
2013 |
$2.322.32 |
|
|
2012 |
$2.162.16 |
|
|
2011 |
$2.022.02 |
After underpricing and flotation costs, the firm expects to net
$33.5033.50
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.
Homework Answers
Answer #1
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