10-21

2015 7.22 4.91 2010 2016 5.31 2011 The current interest rate on new debt is 9%, Foust's marginal tax rate is 40 and its targe capital structure is 40% debt and 60% equity. a. Calculate Foust's after-tax cost of debt and common equity. Calculate the cost of D1 Po g as r b. Find Foust's WACC. omprehensivelspreadsheet Problem 10-21 CALCULATING THE WACC Here is the condensed 2016 balance sheet for Skye Computer Company (in thousands of dollars 2016 Current assets $2,000 Net fixed assets 3,000 Total assets Accounts payable and accruals $900 Short-term debt 100 Long-term debt 1,100 Preferred stock (10,000 shares) 250 Common stock (50,000 shares 1,300 Retained earnings 1,350 Total common equity $2,650 Total liabilities and equity $5,000 Skye's earnings per share last year were $3.20. The common stock sells for $5 year's dividend (Do) was $2.10, and a flotation cost of 10% would be required new common stock. Security analysts are projecting will grow at an annual that the common dividend per share, and its rate of 9%. Skye's preferred stock pays $3.30 preferred stock a dividend of se for s30.00 per share. The firm's before cos tax last 2015 7.22 4.91 2010 2016 5.31 2011 The current interest rate on new debt is 9%, Foust's marginal tax rate is 40 and its targe capital structure is 40% debt and 60% equity. a. Calculate Foust's after-tax cost of debt and common equity. Calculate the cost of D1 Po g as r b. Find Foust's WACC. omprehensivelspreadsheet Problem 10-21 CALCULATING THE WACC Here is the condensed 2016 balance sheet for Skye Computer Company (in thousands of dollars 2016 Current assets $2,000 Net fixed assets 3,000 Total assets Accounts payable and accruals $900 Short-term debt 100 Long-term debt 1,100 Preferred stock (10,000 shares) 250 Common stock (50,000 shares 1,300 Retained earnings 1,350 Total common equity $2,650 Total liabilities and equity $5,000 Skye's earnings per share last year were $3.20. The common stock sells for $5 year's dividend (Do) was $2.10, and a flotation cost of 10% would be required new common stock. Security analysts are projecting will grow at an annual that the common dividend per share, and its rate of 9%. Skye's preferred stock pays $3.30 preferred stock a dividend of se for s30.00 per share. The firm's before cos tax last