QUESTION $2$

REQUIRED

Use the information provided below to calculate the following $($expressed to two decimal places$)$:

$2\mathrm{.}1$ Cost of equity using the Capital Asset Pricing Model

$2\mathrm{.}2$ Cost of preference shares

$2\mathrm{.}3$ Cost of debt

$2\mathrm{.}4$ Weighted average cost of capital $($using your answers from questions $2\mathrm{.}1$ to $2\mathrm{.}3)$

$2\mathrm{.}5$ Cost of equity using the Dividend Growth Model.

INFORMATION

Kingston Limited intends raising finance for a proposed new project. The financial manager has provided the following information to determine the present cost of capital to the company:

The capital structure consists of the following:

$4$ million ordinary shares issued at R$4$ each but currently trading at R$6$ each.

$3$ million $12\%,$ R$4$ preference shares which incurred floatation costs of R$0\mathrm{.}16$ per share.

R$400000015\%$ Bank loan, due in July $2027.$

Additional information

The company's beta coefficient is $1\mathrm{.}5.$

The risk$-$free rate is $10\%.$

The retum on the market is $25\%.$

A dividend growth of $10\%$ per annum on ordinary shares was maintained over the past five years. The latest dividend paid was $150$ cents per share.

Assume that the company tax rate is $28\%.$