Author Question: You were hired as a consultant to Kroncke Company, whose target capital structure is 50% debt, 20% ... (Read 128 times)

Rafic Kaaki · **on:** Aug 7, 2023

Question 1

You have the following data: r_RF= 5%; RP_M= 6%; and b = 1.33. What is the cost of equity from retained earnings based on the CAPM approach?

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12.40%

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12.98%

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13.25%

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13.65%

Question 2

You were hired as a consultant to Kroncke Company, whose target capital structure is 50% debt, 20% preferred, and 30% common equity. The after-tax cost of debt is 6.8%, the cost of preferred is 7.9%, and the cost of retained earnings is 14%. The firm will not be issuing any new stock. What is its WACC?

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8.38%

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8.62%

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9.18%

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9.75%

gwisel · **Reply #1 on:** Aug 7, 2023

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