Mullineaux Corporation has a target capital structure of 70 percent common stock

Question

Mullineaux Corporation has a target capital structure of 70 percent common stock, 10 percent preferred stock, and 20 percent debt. Its cost of equity is 13 percent, the cost of preferred stock is 4 percent, and the pretax cost of debt is 6 percent. The relevant tax rate is 35 percent.

What is Mullineaux

Mullineaux Corporation has a target capital structure of 70 percent common stock, 10 percent preferred stock, and 20 percent debt. Its cost of equity is 13 percent, the cost of preferred stock is 4 percent, and the pretax cost of debt is 6 percent. The relevant tax rate is 35 percent.

What is Mullineaux

Explanation / Answer

a. What is Mullineaux's WACC?

Using the equation to calculate the WACC, we find:

WACC = .70(.13) + .10(.04) + .20(.06)(1

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