Question 1 1 pts Mullineaux Corporation has a target capital structure of 42 per

Question

Question 1 1 pts Mullineaux Corporation has a target capital structure of 42 percent common stock and 6 percent preferred stock, with the remaining percent in debt. Its cost of equity is 10 percent, the cost of preferred stock is 2 percent, and the pretax cost of debt is 7 percent. The relevant tax rate is 34 percent. What is Mullineaux's WACC? (Enter your answer as a percentage, omit the "%" sign in your response, and round your answer to 2 decimal places. For example, 0.12345 or 12.345% should be entered as 12.35.)

Explanation / Answer

WACC= WEIGHT OF DEBT*COST OF DEBT(1-TAX RATE) + WEIGHT OF EQUTY*COST OF EQUITY + WEIGHT OF PREFERED STOCK*COST OF COMMON PREFERED STOCK

= (1.00-0.42-0.06)*7%(1-0.34) + 0.42*10% + 0.06*2%

= 2.40% + 4.2% + 0.12%  

= 6.72

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