What is Mullineaux’s WACC? (Do not round intermediate calculations and round you

Question

What is Mullineaux’s WACC? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

WACC       %

10.52%, 4.68%, 7.54 and 8.51% are incorrect

Mullineaux Corporation has a target capital structure of 60 percent common stock and 40 percent debt. Its cost of equity is 14 percent, and the cost of debt is 8 percent. The relevant tax rate is 30 percent.

What is Mullineaux’s WACC? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

WACC       %

10.52%, 4.68%, 7.54 and 8.51% are incorrect

Explanation / Answer

Mullineaux Corporation Coat of Debt =8% Tax Rate =30% Post Tax Cost of Debt =8%*(1-30%)= 5.60% WACC calculation : Type of Equity % weight Post Tax cost Wtd cost Common stock   60.00% 14.00% 8.40% Debt   40.00% 5.60% 2.24% Total 10.64% So WACC is 10.64%

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