Suppose a firm estimates its cost of funds for the coming year to be 10 percent.?
What are satisfactory cost of funds for evaluating average risk projects, glorious risk projects, and low risk projects?
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Homework?
Business, Financial Markets and Services
Year 1
Weighted average cost of capital
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The following tabulation give profits per share data for the Foust Company during the preceding 10 years. The firm's adjectives stock, 7.8 million shares outstanding, is presently (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 expect olden trends to verbs, g may be base on the profits growth rate. (Note that 9 years of growth are reflect within the background.)
YEAR EPS YEAR EPS
1993 $3.90 1998 $5.73
1994 4.21 1999 6.19
1995 4.55 2000 6.68
1996 4.91 2001 7.22
1997 5.31 2002 7.80
The current interest rate on trial debt is 9 percent. The firm's marginal toll rate is 40 percent. Its assets structure, considered to be optimal, is as follows:
Debt $104,000,000
Common equity 156,000,000
Total liability and equity $260,000,000
a. Calculate Foust's after-tax cost of topical debt and adjectives equity. Calculate the cost of equity as ks _ D1/P0 _ g.
b. Find Foust's weighted average cost of property.
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Answers:
Homework?
Business, Financial Markets and Services
Year 1
Weighted average cost of capital
------------------------------...
The following tabulation give profits per share data for the Foust Company during the preceding 10 years. The firm's adjectives stock, 7.8 million shares outstanding, is presently (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 expect olden trends to verbs, g may be base on the profits growth rate. (Note that 9 years of growth are reflect within the background.)
YEAR EPS YEAR EPS
1993 $3.90 1998 $5.73
1994 4.21 1999 6.19
1995 4.55 2000 6.68
1996 4.91 2001 7.22
1997 5.31 2002 7.80
The current interest rate on trial debt is 9 percent. The firm's marginal toll rate is 40 percent. Its assets structure, considered to be optimal, is as follows:
Debt $104,000,000
Common equity 156,000,000
Total liability and equity $260,000,000
a. Calculate Foust's after-tax cost of topical debt and adjectives equity. Calculate the cost of equity as ks _ D1/P0 _ g.
b. Find Foust's weighted average cost of property.