Ross Textiles wishes to measure its cost of common stock equity. The​ firm's stock is currently selling for ​$72.54. The firm just recently paid a dividend of ​$4.06. The firm has been increasing dividends regularly. Five years​ ago, the dividend was just​$2.96.
After underpricing and flotation​ costs, the firm expects to net​$66.01 per share on a new issue.
a. Determine average annual dividend growth rate over the past 5 years. Using that growth​ rate, what dividend would you expect the company to pay next​ year?
b. Determine the net​ proceeds, Nn​, that the firm will actually receive.
c. Using the​ constant-growth valuation​ model, determine the required return on the​ company's stock, ​, which should equal the cost of retained​ earnings, rr.
d. Using the​ constant-growth valuation​ model, determine the cost of new common​ stock, rn.