The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 6.3 million shares outstanding, is now (1/1/22) selling for $77.00 per share. The expected dividend at the end of the current year (12/31/22) is 40% of the 2021 EPS. Because investors expect past trends to continue, g may be based on the historical earnings growth rate. (Note that years of growth are reflected in the 10 years of data.) 6.75 % Year 27.31 2012 2013 % 2014 2015 EPS $3.90 4.21 4.55 .60 % b. Find Foust's WACC. Do not round intermediate calculations. Round your answer to two decimal places. Year 4.91 2016 5.31 2021 7.80 The current interest rate on new debt is 9%; Foust's marginal tax rate is 25% ; and its target capital structure is 40% debt and 60% equity. a. Calculate Foust's after-tax cost of debt. Round your answer to two decimal places. 2017 $5.73 2018 2019 EPS 2020 6.19 6.68 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. 7.22

The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 6.3 million shares outstanding, is now (1/1/22) selling for $77.00 per share. The expected dividend at the end of the current year (12/31/22) is 40% of the 2021 EPS. Because investors expect past trends to continue, g may be based on the historical earnings growth rate. (Note that years of growth are reflected in the 10 years of data.) 6.75 % Year 27.31 2012 2013 % 2014 2015 EPS $3.90 4.21 4.55 .60 % b. Find Foust's WACC. Do not round intermediate calculations. Round your answer to two decimal places. Year 4.91 2016 5.31 2021 7.80 The current interest rate on new debt is 9%; Foust's marginal tax rate is 25% ; and its target capital structure is 40% debt and 60% equity. a. Calculate Foust's after-tax cost of debt. Round your answer to two decimal places. 2017 $5.73 2018 2019 EPS 2020 6.19 6.68 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. 7.22

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Description: The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 6.3 million shares outstanding, is now (1/1/22) selling for $77.00 per share. The expecteddividend at the end of the current year (12/31/22) is 40%

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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