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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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The value of the annuity in 9 years is $204,112.77

The value of the annuity in 7 years is $174,993.80

The present value is  $102,107.20

An annuity can be described as a cash flow at regular periods. Here, this annuity provides cash flows semi-annually.

The present value of the annuity has to be determined first.

Present value is the value of an annuity at time zero. It is calculated by discounting cash flows with the discount rate.

Present value would be determined with the aid of a  Present Value of an Ordinary Annuity Table. Please find attached an image of the table.

<em><u>Annuity information </u></em>

  • payments = $10,400
  • years of payments = 9
  • Number of payments = 18
  • Start date = year 11.5
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How to use the table : the present value of annuity factor is found at where 20 (end date of the annuity) and 8% (discount rate) meet. This is 9.818

Present value =  the present value of annuity factor x semi-annual payment

$10,400 x 9.818 = $102,107.20

Value of the annuity in 9 years = $102,107.20 x (1.08)^9 = $204,112.77

Value of the annuity in 7 years = $102,107.20 x (1.08)^7 = $174,993.80

A similar question was solved here: brainly.com/question/13405140?referrer=searchResults

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Assume that a $1,000,000 par value, semiannual coupon US Treasury note with four years to maturity has a coupon rate of 4%. The
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Answer:

Explanation:

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Cash flow  4% = 40000 per year for 4 year p.v using annuity

Cash flow = 1000000 at year four present value using compound formula

Present value at yield rate 7.7%

Cash flow Discount Factor Present Value

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40000         3.334365155           133374.6062

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Answer:

1. What would depreciation expense be for year 3 under the straight-line method?

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Dr Loss on sale of equipment 55,000

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purchase cost $480,000

useful life 8 years

salvage value $30,000

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