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Question 1 6 Kinge - Cheese Incorporated has 6 , 0 0 0 , 0 0 0 shares of common stock outstanding. The company also
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KingeCheese Incorporated has shares of common stock outstanding. The company also has an issue of preference shares.outstanding. Each preference share has a par value of $ and pays a percent dividend.
KingeCheese Incorporated has onehundred and twenty thousant bonds with a semi annual coupon of percent outstanding, each with a par value of $
The common stock currently sell for $ per and has a beta of the preferred stock currently
sells for $ per share, and the bonds have years to maturity and sell for percent of par.
The market risk premium is percent, Treasury bills are yielding percent, and the company's tax rate is percent.
Required:
What is the firm's cost of common equity? marks
What is the firm's cost of preferred equity? marks
What is the firm's aftertax cost of debt? marks
What is the market value of each element in the firm's capital structure? marks
What is KingeCheese Inc.s weighted average cost of capital? marks
Briefly discuss one advantage of using the SML approach to finding the cost of equity
capital? marks
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