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Mullineaux Corporation has a target capital structure of 64 percent common stock, 9 percent preferred stock, and 27 percent debt. Its cost of equity is 12.9 percent, the cost of preferred stock is 5.9 percent, and the cost of debt is 7.6 percent. The relevant tax rate is 40 percent. What is Mullineaux�s WACC?

Respuesta :

Answer:

10.02%

Explanation:

The computation of the WACC is shown below. The formula of WACC is shown below:

= (Weightage of debt × cost of debt)  + (Weightage of preferred stock) × (cost of preferred stock) + (Weightage of  common stock) × (cost of common stock)

= 27% × 7.6% × (1 - 0.40) + 9% × 5.9% + 64% × 12.9%

= 2.052% × (1 - 0.40) + 0.531% + 8.256%

= 10.02%

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Assuming the cost of preferred stock is 5.9 percent, and the cost of debt is 7.6 percent. Mullineaux WACC is 10.02%.

Weighted average cost of capital

Usingn this formula

WACC= (Weighted of debt × cost of debt)  + (Weighted of preferred stock) × (Cost of preferred stock) + (Weighted of  common stock) × (cost of common stock)

Let plug in the formula

WACC= 27% × 7.6% × (1 - .40) + 9% × 5.9% + 64% × 12.9%

WACC= 2.052% × 0.6 + 0.531% + 8.256%

WACC=10.018%

WACC= 10.02% (Approximately)

Inconclusion Mullineaux WACC is 10.02%.

Learn more about WACC here:https://brainly.com/question/25566972

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