Question

In: Finance

The following table gives Foust Company's earnings per share for the last 10 years. The common...

The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 8.6 million shares outstanding, is now (1/1/17) selling for $77 per share. The expected dividend at the end of the current year (12/31/17) is 50% of the 2016 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
2007 $3.90 2012 $5.73
2008 4.21 2013 6.19
2009 4.55 2014 6.68
2010 4.91 2015 7.22
2011 5.31 2016 7.80

The current interest rate on new debt is 9%; Foust's marginal tax rate is 40%; and its target capital structure is 30% debt and 70% equity.

  1. 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 rs = D1/P0 + g. Round your answer to two decimal places. Do not round your intermediate calculations.
    %

  3. Find Foust's WACC. Round your answer to two decimal places. Do not round your intermediate calculations.
    %

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

The following table gives Foust Company's earnings per share for the last 10 years. The common...
The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 7.6 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...
The following table gives Foust Company's earnings per share for the last 10 years. The common...
The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 7.2 million shares outstanding, is now (1/1/17) selling for $60 per share. The expected dividend at the end of the current year (12/31/17) is 60% of the 2016 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...
WACC The following table gives Foust Company's earnings per share for the last 10 years. The...
WACC The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 7.5 million shares outstanding, is now (1/1/17) selling for $61 per share. The expected dividend at the end of the current year (12/31/17) is 55% of the 2016 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...
WACC The following table gives Foust Company's earnings per share for the last 10 years. The...
WACC The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 8.2 million shares outstanding, is now (1/1/17) selling for $77 per share. The expected dividend at the end of the current year (12/31/17) is 40% of the 2016 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...
Over the last 10? years, a firm has had the earnings per share shown in the...
Over the last 10? years, a firm has had the earnings per share shown in the following? table: . 2015 $1.50 2010 $3.55 2014 $3.01 2009 $1.76 2013 $3.73 2008 $1.76 2012 $2.93 2007 -$1.31 2011 $4.81 2006 $0.56 a.??If the? firm's dividend policy were based on a constant payout ratio of? 40% for all years with positive earnings and? 0% otherwise, what would be the annual dividend for 2015?? b.??If the firm had a dividend payout of? $1.00 per?...
Alternative dividend policies  Over the last 10​ years, a firm has had the earnings per share...
Alternative dividend policies  Over the last 10​ years, a firm has had the earnings per share shown in the following​ table: Year Earnings per Share Year Earnings per Share 2019 $1.50 2014 $2.19 2018 $3.93 2013 $1.18 2017 $3.76 2012 $1.18 2016 $3.99 2011 -$1.07 2015 $3.93 2010 $0.85 a. If the​ firm's dividend policy were based on a constant payout ratio of​ 40% for all years with positive earnings and​ 0% otherwise, what would be the annual dividend for...
what was the earnings per common share
Net Income for the period totaled OMR75,000,preferred dividends paid totaled OMR10,000 and common dividends paid totaled OMR30,000.If there 100,000 common shares outstanding throughout the year.What was the earnings per common share (a)44.50 OMR (b)0.35 OMR (c)0.65 OMR (d) 4.50 OMR
The price of a share of stock divided by the company's estimated future earnings per share...
The price of a share of stock divided by the company's estimated future earnings per share is called the P/E ratio. High P/E ratios usually indicate "growth" stocks, or maybe stocks that are simply overpriced. Low P/E ratios indicate "value" stocks or bargain stocks. A random sample of 51 of the largest companies in the United States gave the following P/E ratios†. 11 35 19 13 15 21 40 18 60 72 9 20 29 53 16 26 21 14...
The price of a share of stock divided by the company's estimated future earnings per share...
The price of a share of stock divided by the company's estimated future earnings per share is called the P/E ratio. High P/E ratios usually indicate "growth" stocks, or maybe stocks that are simply overpriced. Low P/E ratios indicate "value" stocks or bargain stocks. A random sample of 51 of the largest companies in the United States gave the following P/E ratios†. 11 35 19 13 15 21 40 18 60 72 9 20 29 53 16 26 21 14...
Company ABC has just announced earnings of $2 per share. Based on the last five years,...
Company ABC has just announced earnings of $2 per share. Based on the last five years, earnings have grown at a rate of 20% per annum and the company expects this to continue for the next five years, after which it expects earnings to remain constant forever. The company has a policy of paying out 30% of its earnings as dividends. ABC stock has a beta of 1.2. The yield to maturity on 10-year government bonds is 2% and market...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT