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Ipatiy [6.2K]
3 years ago
7

Mullineaux Corporation has a target capital structure of 65 percent common stock and 35 percent debt. Its cost of equity is 12.8

percent, and the cost of debt is 7.5 percent. The relevant tax rate is 23 percent. What is the company’s 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:
Zepler [3.9K]3 years ago
8 0

Answer:

WACC = 10.35%

Explanation:

The weighted Average cost of Capital is the average cost of capital for the different sources of long-term capital available to a firm weighted according to the proportion that each source of finance bears to the total capital in the pool..  

After-tax cost of debt = (1- tax rate) × before tax cost of debt  

= (1-0.23)× 7.5% = 5.8%  

Type          Cost (%)       Weight         cost × weight

Equity          12.8              65%               8.32

Debt            5.8                 35%       <u>       2.03  </u>

Total                                                      10.3  

WACC = 10.35%

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7 0
3 years ago
Hotaling Corporation is analyzing a capital expenditure that will involve a cash outlay of $146,040. Estimated cash flows are ex
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Answer:

The solution shows that a rate of return of 10% which provides an annuity factor of 4.868 generates an NPV which is equal to zero. Thus, our IRR or internal rate of return is 10%.

Explanation:

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A 3-year annual coupon bond has coupons of $12 per year starting one year from now and matures in 3 years for the amount $100. T
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Answer: Macaulay Duration = 2.6908154485 = 2.69

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