he following table gives Foust Company's earnings per share for the last 10 years. The common stock, 7.2 million shares outstanding 79.00 per share. The expected dividend at the end of the current year (12/31/22) is 60% of the 2021 EPS. Because investors expect hay be based on the historical earnings growth rate. (Note that 9 years of growth are reflected in the 10 years of data.) Year EPS 2012 $3.90 2013 4.21 2014 4.55 2015 4.91 2016 5.31 he current interest rate on new debt is 12%; Foust's marginal tax rate is 25%; and its target capital structure is 55% debt and 45% a. Calculate Foust's after-tax cost of debt. Round your answer to two decimal places. Year 2017 2018 2019 2020 2021 % EPS $5.73 6.19 6.68 7.22 7.80 Calculate Foust's cost of common equity. Calculate the cost of equity as rs = D₁/Po + g. Do not round intermediate calculatio two decimal places.

he following table gives Foust Company's earnings per share for the last 10 years. The common stock, 7.2 million shares outstanding 79.00 per share. The expected dividend at the end of the current year (12/31/22) is 60% of the 2021 EPS. Because investors expect hay be based on the historical earnings growth rate. (Note that 9 years of growth are reflected in the 10 years of data.) Year EPS 2012 $3.90 2013 4.21 2014 4.55 2015 4.91 2016 5.31 he current interest rate on new debt is 12%; Foust's marginal tax rate is 25%; and its target capital structure is 55% debt and 45% a. Calculate Foust's after-tax cost of debt. Round your answer to two decimal places. Year 2017 2018 2019 2020 2021 % EPS $5.73 6.19 6.68 7.22 7.80 Calculate Foust's cost of common equity. Calculate the cost of equity as rs = D₁/Po + g. Do not round intermediate calculatio two decimal places.

Name: eBookThe following table gives Foust Company's earnings per share for
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Description: eBookThe following table gives Foust Company's earnings per share for the last 10 years. The common stock, 7.2 million shares outstanding, is now (1/1/22) selling for$79.00 per share. The expected dividend at the end of the current year (12/31/22) i

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 2P

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The following table gives Foust Company’s earnings per share for the last 10 years.The common stock, 7.8 million shares outstanding, is now (1/1/19) selling for $65.00 pershare. The expected dividend at the end of the current year (12/31/19) is 55% of the 2018EPS. 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.) The current interest rate on new debt is 9%; Foust’s marginal tax rate is 40%, and its targetcapital structure is 40% debt and 60% equity.a. Calculate Foust’s after-tax cost of debt and common equity. Calculate the cost of equityas rs = D1/P0 + g.b. Find Foust’s WACC.Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).Editorial review has deemed that any suppressed content does not…
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