labtoy
Jan 20, 2008, 03:57 PM
this question has been asked before. however, there is still no answer.
the following gives earning per share figures for the Foust Company during the prece3ding 10 years. the firm's common stock, 7.8 million shares outstanding, is now (1/1/03) selling for $65 per share, and the expected dividend at the end of the current year (2003) is 55 percent of the 2002 EPS. because investors expect past trend to continue, g may be based on the earnings growth rate. (Note that 9 years of growth are reflected in the data.)
the current interest rate on new debt is 9 percent. the firm's marginal tax rate is 40 percent. its capital structure, considered to be optimal, is as follows:
debt $104,000,000
common equity $156,000,000
total liabilities and equity $260,000,000
a. calculate Foust's after-tax cost of new debt and common equity. calculate the cost of equity as Ks = D1/P0+g.
b. find foust's weighted average cost of capital.
Note: if someone can show me step by step that would be great. I need more then just the answer.
the following gives earning per share figures for the Foust Company during the prece3ding 10 years. the firm's common stock, 7.8 million shares outstanding, is now (1/1/03) selling for $65 per share, and the expected dividend at the end of the current year (2003) is 55 percent of the 2002 EPS. because investors expect past trend to continue, g may be based on the earnings growth rate. (Note that 9 years of growth are reflected in the data.)
the current interest rate on new debt is 9 percent. the firm's marginal tax rate is 40 percent. its capital structure, considered to be optimal, is as follows:
debt $104,000,000
common equity $156,000,000
total liabilities and equity $260,000,000
a. calculate Foust's after-tax cost of new debt and common equity. calculate the cost of equity as Ks = D1/P0+g.
b. find foust's weighted average cost of capital.
Note: if someone can show me step by step that would be great. I need more then just the answer.