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5 Mullineaux Corporation has a target capital structure of 55 percent common stock and 45 percent debt....

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Finance

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Mullineaux Corporation has a target capital structure of 55percent common stock and 45 percent debt. Its cost of equity is12.6 percent, and the cost of debt is 7.3 percent. The relevant taxrate is 21 percent.
What is the company’s WACC? (Do not round intermediatecalculations and enter your answer as a percent rounded to 2decimal places, e.g., 32.16.)

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Ans 9.53%

Investment Before Tax Cost After Tax Cost (Before Tax Rate* (1 - Tax Rate)) Average Cost
Debt                                                           45 7% 5.77%                          2.60
Common Stock                                                           55 12.60% 12.60%                          6.93
                                                        100 Total Cost                          9.53
After tax cost of common stock is same as before tax. Since there is no tax effect on common stock

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5Mullineaux Corporation has a target capital structure of 55percent common stock and 45 percent debt. Its cost of equity is12.6 percent, and the cost of debt is 7.3 percent. The relevant taxrate is 21 percent.What is the company’s WACC? (Do not round intermediatecalculations and enter your answer as a percent rounded to 2decimal places, e.g., 32.16.)

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