Mullineaux Corporation has a target capital structure of 70 percent comm 30 percent debt. Its cost of equity is 11.9 percent, and the cost of debt is 6. relevant tax rate is 24 percent. What is the company's WACC? (Do not rou intermediate calculations and enter your answer as a percent rounded t places, e.g., 32.16.)
Mullineaux Corporation has a target capital structure of 70 percent comm 30 percent debt. Its cost of equity is 11.9 percent, and the cost of debt is 6. relevant tax rate is 24 percent. What is the company's WACC? (Do not rou intermediate calculations and enter your answer as a percent rounded t places, e.g., 32.16.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![**Mullineaux Corporation Capital Structure Analysis**
Mullineaux Corporation has a target capital structure consisting of 70 percent common stock and 30 percent debt. The cost of equity is 11.9 percent, while the cost of debt is 6.6 percent. With a relevant tax rate of 24 percent, the objective is to determine the company's Weighted Average Cost of Capital (WACC).
**Calculation Instructions:**
- Calculate the WACC using the formula:
\[
\text{WACC} = \left( E/V \right) \times \text{Re} + \left( D/V \right) \times \text{Rd} \times (1 - \text{Tc})
\]
Where:
- \( E/V \) = percentage of equity (70%)
- \( D/V \) = percentage of debt (30%)
- \( \text{Re} \) = cost of equity (11.9%)
- \( \text{Rd} \) = cost of debt (6.6%)
- \( \text{Tc} \) = corporate tax rate (24%)
- Please ensure calculations are precise, and the final WACC value should be recorded as a percentage rounded to two decimal places (e.g., 32.16%).
**Interactive Input Field:**
- WACC: [Input box for % entry]
This calculation is crucial for assessing the overall cost of financing and the valuation of investment opportunities for Mullineaux Corporation.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff00761e5-6ea2-4b64-9c87-d0591240e351%2F66c1feed-b5c2-421a-a53d-8cdc67edd724%2F4scelca_processed.png&w=3840&q=75)
Transcribed Image Text:**Mullineaux Corporation Capital Structure Analysis**
Mullineaux Corporation has a target capital structure consisting of 70 percent common stock and 30 percent debt. The cost of equity is 11.9 percent, while the cost of debt is 6.6 percent. With a relevant tax rate of 24 percent, the objective is to determine the company's Weighted Average Cost of Capital (WACC).
**Calculation Instructions:**
- Calculate the WACC using the formula:
\[
\text{WACC} = \left( E/V \right) \times \text{Re} + \left( D/V \right) \times \text{Rd} \times (1 - \text{Tc})
\]
Where:
- \( E/V \) = percentage of equity (70%)
- \( D/V \) = percentage of debt (30%)
- \( \text{Re} \) = cost of equity (11.9%)
- \( \text{Rd} \) = cost of debt (6.6%)
- \( \text{Tc} \) = corporate tax rate (24%)
- Please ensure calculations are precise, and the final WACC value should be recorded as a percentage rounded to two decimal places (e.g., 32.16%).
**Interactive Input Field:**
- WACC: [Input box for % entry]
This calculation is crucial for assessing the overall cost of financing and the valuation of investment opportunities for Mullineaux Corporation.
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