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Karo-lina-s [1.5K]
3 years ago
15

Mullineaux Corporation has a target capital structure of 70 percent common stock and 30 percent debt. Its cost of equity is 16 p

ercent, and the cost of debt is 10 percent. The relevant tax rate is 30 percent. What is the companyâs WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Business
1 answer:
alexira [117]3 years ago
6 0

Answer:

The company WACC is 13.30%

Explanation:

For computing the WACC, first we have to find the weight-age of both debt and equity.

Since in the question, the weightage of debt and equity is given which is equals to

Debt = 30%

And, Equity or common stock = 70%

So, we can easily compute the WACC. The formula is shown below

= Weighted of debt × cost of debt × (1- tax rate) + Weighted of equity × cost of equity

= 0.30 × 0.10 × (1 - 0.30) + 0.70 × 0.16

= 0.021 + 0.112

= 13.30%

Hence, the company WACC is 13.30%

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