The following table gives Foust Company's earnings per share for the last 10 years. Thecommon stock, 7.8 million shares outstanding, is now (1/1/22) selling for $77.00 pershare. The expected dividend at the end of the current year (12/31/22) is 45% of the 2021EPS. Because investors expect past trends to continue, g may be based on the historicalearnings growth rate. (Note that 9 years of growth are reflected in the 10 years of data.)YearEPSYearEPS2012$3.902017$5.7320134.2120186.1920144.5520196.6820154.9120207.2220165.3120217.80The current interest rate on new debt is 8%; Foust's marginal tax rate is 25%; and itstarget capital structure is 30% debt and 70% equity.a. Calculate Foust's after-tax cost of debt. Round your answer to two decimal places.6.00Calculate Foust's cost of common equity. Calculate the cost of equity as rs =D1/Po + g.Do not round intermediate calculations. Round your answer to two decimal places.-5.44%b. Find Foust's WACC. Do not round intermediate calculations. Round your answer to twodecimal places.2.57%

Every company invests in capital expenditure and for that, it requires money to purchase a new…

Calculate Foust's after-tax cost of debt. Round your answer to two decimal places. 6.00 Calculate Foust's cost of common equity. Calculate the cost of equity as rs = D1/Po + g. Do not round intermediate calculations. Round your answer to two decimal places. -5.44 % Find Foust's WACC. Do not round intermediate calculations. Round your answer to two decimal places. 2.57 %

Calculate Foust's after-tax cost of debt. Round your answer to two decimal places. 6.00 Calculate Foust's cost of common equity. Calculate the cost of equity as rs = D1/Po + g. Do not round intermediate calculations. Round your answer to two decimal places. -5.44 % Find Foust's WACC. Do not round intermediate calculations. Round your answer to two decimal places. 2.57 %

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Problem 16-3 ROE and Leverage [LO1, 2] Fujita, Incorporated, has no debt outstanding and a total market value of $356,900. Earnings before Interest and taxes, EBIT, are projected to be $50,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 16 percent higher. If there is a recession, then EBIT will be 25 percent lower. The company is considering a $180,000 debt Issue with an interest rate of 5 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,300 shares outstanding. Ignore taxes for questions (a) and (b). Assume the company has a market- to-book ratio of 1.0 and the stock price remains constant. a-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. Calculate the percentage changes in ROE when the economy expands or enters a…
The Crane Products Co. currently has debt with a market value of $275 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,418.61 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $11 per share. The preferred shares pay an annual dividend of $1.20. Crane also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 5 percent per year forever. If Crane is subject to a 40 percent marginal tax rate, then what is the firm's weighted average cost of capital? Excel Template (Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this screen for easy…
Assume the firm has a tax rate of 23 percent. c-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is Issued. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. Calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-3. Calculate the return on equity (ROE) under each of the three economic scenarios assuming the firm goes through with the recapitalization. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-4. Given the recapitalization, calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round…
Carter Paint Company has plants in four provinces. Sales last year were $100 million, and the balance sheet at year-end is similar in percent of sales to that of previous years (and this will continue in the future). All assets and current liabilities will vary directly with sales. Assume the firm is already using capital assets at full capacity. Cash Accounts receivable. Inventory Current assets Capital assets Assets Total assets $9 15 10 34 34 $68 Balance Sheet (in $ millions) Liabilities and Shareholders' Equity Accounts payable Accrued vages Accrued taxes Current liabilities. Long-term debt Common stock Retained earnings Total liabilities and shareholders' equity $9 8 7 24 10 15 19 $68 The firm has an aftertax profit margin of 8 percent and a dividend payout ratio of 40 percent. a. If sales grow by 20 percent next year, determine how many dollars of new funds are needed to finance the expansion. (Do not round intermediate calculations. Enter the answer in millions. Round the final…
7. Problem 3-08 (Profit Margin and Debt Ratio) Profit Margin and Debt Ratio eBook Profit margin: Assume you are given the following relationships for the Haslam Corporation: Sales/total assets Return on assets (ROA) Return on equity (ROE) Calculate Haslam's profit margin and liabilities-to-assets ratio. Do not round intermediate calculations. Round your answers to two decimal places. Liabilities-to-assets ratio: % % 3 Problem Walk-Through % 1.1 4% 6% Suppose half of its liabilities are in the form of debt. Calculate the debt-to-assets ratio. Do not round intermediate calculations. Round your answer to two decimal places.
THE ANSWER IS NOT 21% OR 0.2% can you give me a few answers to try? Thank you!
only looking for parts c-1 and c-3
Calculate the aftertax cost of debt under each of the following conditions. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) raw C. Yield 8.0% 8.6 % 6.5 % Corporate Tax Rate 22 % 25 % Aftertax Cost of Debt % % %

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