Mullineaux Corporation has a target capital structure of 55 percent common stock

Question

Mullineaux Corporation has a target capital structure of 55 percent common stock, 10 percent preferred stock, and 35 percent debt. Its cost of equity is 9 percent, the cost of preferred stock is 4 percent, and the pretax cost of debt is 5 percent. The relevant tax rate is 34 percent.

1.) What is Mullineaux

Mullineaux Corporation has a target capital structure of 55 percent common stock, 10 percent preferred stock, and 35 percent debt. Its cost of equity is 9 percent, the cost of preferred stock is 4 percent, and the pretax cost of debt is 5 percent. The relevant tax rate is 34 percent.

1.) What is Mullineaux

Explanation / Answer

A

WACC = Proportion of Each Fund * Cost of Fund
= 0.55*9% + 0.1*4% + 0.35*5(1-0.34)
= 6.505%

B

After Tax Cost of Debt = Pretax Cost of Debt * (1

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