als ctory Ch 10: End-of-Chapter Problems - The Cost of Capital E eBook The following table gives Foust Company's earning

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Als Ctory Ch 10 End Of Chapter Problems The Cost Of Capital E Ebook The Following Table Gives Foust Company S Earning 1 (34.34 KiB) Viewed 11 times

als ctory Ch 10: End-of-Chapter Problems - The Cost of Capital E eBook The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 6.0 million shares outstanding, is now (1/1/20) selling for $70.00 per share. The expected dividend at the end of the current year (12/31/20) is 55% of the 2019 EPS. Because investors expect past trends to continue, g may be based on the historical earnings growth rate. (Note that 9 years of growth are reflected in the 10 years of data.) Year EPS Year EPS 2010 $3.90 2015 $5.73 2011 4.21 2016 6.19 2012 4.55 2017 6.68 2013 4.91 2018 7.22 2014 5.31 2019 7.80 The current interest rate on new debt is 8%; 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. % Calculate Foust's cost of common equity. Calculate the cost of equity as r, D/Po+ 9. Do not round intermediate calculations. Round your answer to two decimal places. % b. Find Foust's WACC. Do not round intermediate calculations. Round your answer to two decimal places. Grade it Now Save & Continue X