Calculate fousts after-tax cost of debt

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The following table gives Foust Company‘s earnings per share for the last 10 years. The common stock, 8.4 million shares outstanding. is now (1/1/20) selling for $64.00 per share. The expected dividend at the end of the current year (12/31/20) is 40% of the 2019 EPS. Because investors expect past trends to oontinue. may be based on the historical earnings growth rate. {Note that 9 years of growth are re?ected in the 10 years of data.)

Year   EPS   Year   EPS

2010 $3.90 2015 $5.23

2011 4.21 2015 5.19

2012 4.55 201? 5.58

2013 4.91 2010 2.22

2014 5.31 2019 2.80 The current interest rate on new debt is 12%; Foust's marginal tax rate is 25%: and its target capital structure is 50% debt and 40% equity.

Question a. 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 = DliPo + Q. Do not round intermediate calculations. Round your answer to two decimal places

Question b. Find Foust's WACC. Do not round intermediate calculations. Round your answer to two decimal place

Reference no: EM132489990

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