Answer Happy

The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 7.0 million shares outstanding, is now (1/1/20) selling for $71.00 per share. The expected dividend at the end of the current year (12/31/20) is 65% 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 EPS $3.90 2015 $5.73 4.21 2016 6.19 4.55 2017 6.68 4.91 2018 7.22 5.31 2019 7.80 The current interest rate on new debt is 12%; Foust's marginal tax rate is 25%; and its target capital structure is 60% debt and 40% equity. a. Calculate Foust's after-tax cost of debt. Round your answer to two decimal places. % Year 2010 2011 2012 2013 2014 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. % b. Find Foust's WACC. Do not round intermediate calculations. Round your answer to two decimal places. %