PLEASE ANSWER IMMEDIATELY!!!! DESPERATE!! Cost of common stock equity Ross Texti

Question

PLEASE ANSWER IMMEDIATELY!!!! DESPERATE!!

Cost of common stock equity Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for $32.34. The firm expects to pay a $3.22 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 2014 2013 2012 $2.95 $2.74 $2.52 $2.17

Explanation / Answer

a) Growth rate, g = (D2015 / D2011)^(1/4) - 1 = 9.13%

b) Net Proceeds, N = $28.78

c) Cost of retained earnings, rs = D1 / P + g = 3.22 / 32.34 + 9.13% = 19.09%

d) Cost of new stock, rn = D1 / N + g = 3.22 / 28.78 + 9.13% = 20.32%

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