Question

The following tabulation gives earnings per share figures for the Foust’s 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 expected past trends to continue, g may be based on the earning growth rate. (Note that 9 years of growth are reflected in the data.)

YEAR ESP YEAR ESP
1993 $3.90 1998 $5.37
1994 4.21 1999 6.19
1995 4.55 2000 6.68
1996 4.91 2001 7.22
1997 5.31 2002 7.80

(A) Calculate Foust’s after-tax cost of new debt and common equity. Calculate the cost of equity as Ks=D1/P0+g. Thse are exponents however it would not allow me to paste them correctly.

(B) Find Foust’s weighted average cost of capital.



Please Help me I am s lost. I need help as soon as posible.

Answer 1

The table is missing, and your question is not stated.

If you cannot copy and paste successfully, you'll need to type in the elements of the table for a tutor to see.

=)

Answer 2

YEAR ESP YEAR ESP
1993 $3.90 1998 $5.37
1994 4.21
1999 6.19
1995 4.55 2000 6.68
1996 4.91 2001 7.22
1997 5.31 2002 7.80

(A) Calculate Foust’s after-tax cost of new debt and common equity. Calculate the cost of equity as D1/P0+g. 1 and 0 are exponents.

(B) Find Foust’s weighted average cost of capital.