12. Problem 10.20 (WACC) BA eBook The following table gives Foust Company's earnings per share for the last 10 years. Th

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12 Problem 10 20 Wacc Ba Ebook The Following Table Gives Foust Company S Earnings Per Share For The Last 10 Years Th 1 (40.44 KiB) Viewed 10 times

12. Problem 10.20 (WACC) BA eBook The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 8.5 million shares outstanding, is now (1/1/20) selling for $61.00 per share. The expected dividend at the end of the current year (12/31/20) is 45% 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.) EPS Year 2010 $3.90 2015 $5.73 TIT 2011 4.21 2016 4.55 2017 4.91 2018 5.31 2019 The current interest rate on new debt is 10%; 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. Year % 2012 2013 2014 EPS b. Find Foust's WACC. Do not round intermediate calculations. Round your answer to two decimal places. 6.19 6.68 7.22 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. 7.80