) The following table gives Foust Companys earnings per share (EPS) for the last 10 years The common stock, 7 8 million shares outstanding, is now (1 1 20) selling for $65 00 per share The expected dividend at the end of the current year (12 31 20) is 55 of the 2019 EPS Because investors expect past trends to continue, g may be based on the historical earnings growth rate (Note that 9 years of growth are reflected in the 10 years of data ) Year EPS Growth Year EPS Growth 2010 3 9 2015 5 73 7 91 2011 4 20 7 69 2016 6 19 5 03 2012 4 55 8 33 2017 6 68 6 92 2013 4 91 9 91 2018 7 22 9 08 2014 5 31 8 14 2019 7 80 8 03 Foust has 25 year non callable bonds outstanding with a face value of $1,000, an 12 annual coupon, and a market price of $1,320 Foust can issue perpetual preferred stock at a price of $47 50 a share The stock would pay a constant annual dividend of $3 80 a share Its capital structure, considered to be optimal, is as follows Debt $111,000,000 Preferred Stock $4,000,000 Common equity $155,000,000 Total liabilities and equity $270,000,000 If the company was to issue new debt, what would be a reasonable estimate of the interest rate on that debt If the companys tax rate is 40 , what is its after tax cost of debt Calculate Fousts cost of common equity by DCF approach If the firms beta is 1 4, the risk free rate is 7 , and the average return on the market is 13 , what will be the firms cost of common equity using the CAPM approach If the firms bonds earn a return calculated in part (i) , based on the bond yield plus riskpremium approach, what will be cost of common equity Use the midpoint of the risk premium range discussed in the class vi If you have equal confidence in the inputs used for the three approaches, what is your estimate of Fousts cost of common equity What is the companys cost of preferred stock, r p Find Fousts WACC (use cost of common equity calculated in part vi ) Bartley Barstools has an equity multiplier of 3 8, and its assets are financed with some combination of long term debt and common equity What is its debt to asset ratio Doublewide Dealers has a ROA of 12 , a 3 profit margin, and an ROE of 15 5 What is its total assets turnover What is its equity multiplier Q 2 (a) A company has a 12 WACC One of its core divisions is considering two mutually exclusive investments with the net cash flows given below The divisions beta is DIV 1 6, risk free rate is k RF 7 and risk premium on the market is RP M 6 Year Project A Project B 0 $1000 $1000 1 $200 $800 2 $700 $600 3 $600 $250 4 $800 $134 5 $300 $134 6 $250 $150 Given the information above, you are required to answer the followings What is each projects Payback and discounted payback periods and interpret these numbers What is each projects NPV iii What is each projects IRR iv What is each projects MIRR From your answers to Parts a, b, c and d, which project would be selected What is each projects profitability index vii What is difference between mutually exclusive and independent projects viii List the characteristics of a good capital budgeting technique ix Briefly explain the acceptance and rejection criteria for each technique regarding mutually exclusive and independent projects Kindly Provide brief answers to the following What is the difference between systematic and unsystematic risk What is strategic business plan and why it is important for the success of a firm Explain in your own words Explain for which types of projects, a detailed capital budgeting analysis is required and why What do you mean from retained earnings breakpoint Explain in your own words with an example How can we check whether a firm is paying its creditors well in time Why do we add floatation costs in the calculations of individual components costs vii List and briefly explain the qualitative and quantitative factors considered for ratio analysis Ali Brothers has a Days Sales Outstanding of 46 days, and its annual sales are $5,700,000 What are its accounts receivable balance Assume that it uses a 360 day year

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) The following table gives Foust Companys earnings per share (EPS) for the last 10 years. The common stock, 7.8 million shares outstanding, is now

)The following table gives Foust Companys earnings per share (EPS) for the last 10 years. The common stock, 7.8 million shares outstanding, is now (1/1/20) selling for $65.00 per share. The expected dividend at the end of the current year (12/31/20) is 55% of the 2019 EPS. Because investors expect past trends to continue, g may be based on the historical earnings growth rate. (Note that 9 years of growth are reflected in the 10 years of data.)

Year	EPS	Growth	Year	EPS	Growth
2010	3.9		2015	5.73	7.91
2011	4.20	7.69	2016	6.19	5.03
2012	4.55	8.33	2017	6.68	6.92
2013	4.91	9.91	2018	7.22	9.08
2014	5.31	8.14	2019	7.80	8.03

Foust has 25-year non-callable bonds outstanding with a face value of $1,000, an 12% annual coupon, and a market price of $1,320. Foust can issue perpetual preferred stock at a price of $47.50 a share. The stock would pay a constant annual dividend of $3.80 a share. Its capital structure, considered to be optimal, is as follows:

Debt $111,000,000

Preferred Stock $4,000,000

Common equity $155,000,000

Total liabilities and equity $270,000,000

If the company was to issue new debt, what would be a reasonable estimate of the interest rate on that debt?
If the companys tax rate is 40%, what is its after-tax cost of debt?
Calculate Fousts cost of common equity by DCF approach?
If the firms beta is 1.4, the risk-free rate is 7 %, and the average return on the market is 13%, what will be the firms cost of common equity using the CAPM approach?
If the firms bonds earn a return calculated in part (i), based on the bond-yield-plus-riskpremium approach, what will be cost of common equity? Use the midpoint of the risk premium range discussed in the class. vi. If you have equal confidence in the inputs used for the three approaches, what is your estimate of Fousts cost of common equity.

What is the companys cost of preferred stock, r_p?
Find Fousts WACC. (use cost of common equity calculated in part vi)

Bartley Barstools has an equity multiplier of 3.8, and its assets are financed with some combination of long-term debt and common equity. What is its debt to asset ratio?

Doublewide Dealers has a ROA of 12%, a 3% profit margin, and an ROE of 15.5%. What is its total assets turnover? What is its equity multiplier?

Q-2. (a)A company has a 12% WACC. One of its core divisions is considering two mutually exclusive investments with the net cash flows given below. The divisions beta is _DIV = 1.6, risk free rate is k_RF = 7% and risk-premium on the market is RP_M = 6%

Year	Project A	Project B
0	-$1000	-$1000
1	$200	$800
2	$700	$600
3	$600	$250
4	$800	$134
5	-$300	$134
6	$250	$150

Given the information above, you are required to answer the followings:

What is each projects Payback and discounted payback periods and interpret these numbers?
What is each projects NPV? iii. What is each projects IRR? iv. What is each projects MIRR?
1. From your answers to Parts a, b, c and d, which project would be selected?
2. What is each projects profitability index? vii. What is difference between mutually exclusive and independent projects? viii. List the characteristics of a good capital budgeting technique.

ix. Briefly explain the acceptance and rejection criteria for each technique regarding mutually exclusive and independent projects.

Kindly Provide brief answers to the following:
1. 1. What is the difference between systematic and unsystematic risk?
  2. What is strategic business plan and why it is important for the success of a firm? Explain in your own words.
  3. Explain for which types of projects, a detailed capital budgeting analysis is required and why?
  4. What do you mean from retained earnings breakpoint? Explain in your own words with an example.
  5. How can we check whether a firm is paying its creditors well in time?
  6. Why do we add floatation costs in the calculations of individual components costs? vii. List and briefly explain the qualitative and quantitative factors considered for ratio analysis.

Ali Brothers has a Days Sales Outstanding of 46 days, and its annual sales are $5,700,000. What are its accounts receivable balance? Assume that it uses a 360-day year