Posted by **alley** on Monday, December 3, 2007 at 7:14pm.

Can anyone help me witht his I am so lost.

The following tabulation gives earnings per share figures for the Foust Company during the

preceding 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 trends to continue, g may be based

on the earnings growth rate. (Note that 9 years of growth are reflected in the data.)

YEAR EPS YEAR EPS

1993 $3.90 1998 $5.73

1994 4.21 1999 6.19

1995 4.55 2000 6.68

1996 4.91 2001 7.22

1997 5.31 2002 7.80

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.

## Answer This Question

## Related Questions

- financial managment - The following tabulation gives earnings per share figures...
- accounting - home / study / math / other math / questions and answers / the ...
- fin - The following tabulation gives earnings per share figures for the Foust ...
- Financial Management - Lansing Inc. has decided to expand. During the last year ...
- Finance - United Technology Corporation (UTC) has $40 million of convertible ...
- Accounting - EPS Malen Arts, Inc., had earnings of $133,750 for 2012. The ...
- financial management - Wheeler Corporation is planning to expand its business ...
- accounting - Pearson began 20XX with 30,000 $1 common shares issued and ...
- financial accounting - (5) Chapter 13 Problem The Torre Company has the ...
- accounting - Assume that the following transactions affected owners' equity for ...

More Related Questions