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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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3 years ago
Zen Manufacturing Company is considering replacing a four-year-old machine with a new, advanced model. The old machine was purch
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Answer:

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3 years ago
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The quantity supplied at this level of price is less than the quantity demanded and therefore the market is in shortage situation.

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