The following table gives Foust Company's earnings per share for the last 10 years. Thecommon stock, 7.8 million shares outstanding, is now (1/1/22) selling for $77.00 pershare. The expected dividend at the end of the current year (12/31/22) is 45% of the 2021EPS. Because investors expect past trends to continue, g may be based on the historicalearnings growth rate. (Note that 9 years of growth are reflected in the 10 years of data.)YearEPSYearEPS2012$3.902017$5.7320134.2120186.1920144.5520196.6820154.9120207.2220165.3120217.80The current interest rate on new debt is 8%; Foust's marginal tax rate is 25%; and itstarget capital structure is 30% debt and 70% equity.a. Calculate Foust's after-tax cost of debt. Round your answer to two decimal places.6.00Calculate Foust's cost of common equity. Calculate the cost of equity as rs =D1/Po + g.Do not round intermediate calculations. Round your answer to two decimal places.-5.44%b. Find Foust's WACC. Do not round intermediate calculations. Round your answer to twodecimal places.2.57%

Every company invests in capital expenditure and for that, it requires money to purchase a new…

Calculate Foust's after-tax cost of debt. Round your answer to two decimal places. 6.00 Calculate Foust's cost of common equity. Calculate the cost of equity as rs = D1/Po + g. Do not round intermediate calculations. Round your answer to two decimal places. -5.44 % Find Foust's WACC. Do not round intermediate calculations. Round your answer to two decimal places. 2.57 %

Calculate Foust's after-tax cost of debt. Round your answer to two decimal places. 6.00 Calculate Foust's cost of common equity. Calculate the cost of equity as rs = D1/Po + g. Do not round intermediate calculations. Round your answer to two decimal places. -5.44 % Find Foust's WACC. Do not round intermediate calculations. Round your answer to two decimal places. 2.57 %

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 10P

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