Question: P9-10 (7e) Ross Textiles wishes to measure its cost of common stock equity. The firm’s...
Question: P9-10 (7e) Ross Textiles wishes to measure its cost of common stock equity. The firm’s stock is c...
P9-10 (7e)
Ross Textiles wishes to measure its cost of common stock equity. The firm’s stock is currently selling for $57.50. The firm expects to pay a $3.40 dividend at the end of 2016. The dividends for the past four years are as follows:
|
Year |
Dividend |
|
2015 |
$3.10 |
|
2014 |
$2.92 |
|
2013 |
$2.60 |
|
2012 |
$2.30 |
|
2011 |
$2.12 |
After underwriting and floatation costs, the firm expects to net $52 per share on a new issue.
c. Using the Constant Growth Model, determine the cost of retained earnings.
d. Using the Constant Growth Model, determine the cost of new common stock.
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