Cost of common stock equityassume that today is january 1, Ask an Expert

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Cost of common stock equity

Assume that today is January 1, 2013. Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for $55.69. The firm expects to pay a $1.67 dividend at the end of the year (2013). The growth rate of the dividends is 7.46%. After underpricing and flotation? costs, the firm expects to net $49.56 per share on a new issue.

a. Using the constant-growth valuation model, determine the cost of retained earnings, r Subscript s.

b. Using the constant-growth valuation model, determine the cost of new common stock, r Subscript n

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93040219

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