|
|
| *Ostroff, Fair and Company>>>Investing |
Calculate Foust's after-tax cost of new debt and common equity. Calculate the cost of equity as ks=D1/p0+g. |
The following tabulations gives earnings per share figures for the Foust Company during the precedting 10 years. The firms common stock, 7.8 million shares outstanding, is 1/1/03 selling for $65.00 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.The current interest tate on new debt is 9 percent. The firms marginal tax is rate is 40 percent. It 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 Then the last question is Find Fousts weighted average of capital. Thanks for all the info, makes it much easier to solve, so lets get started. ks=D1/p0+g After doing the math on a calculator your going to have a weighed average of capital of $189,500 not to bad considering the 9 years of growth. |
| Tags |
| Renting & Real Estate Personal Finance Investing Insurance Credit |
Finance Categories--Copyright/IP Policy--Contact Webmaster |