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7 Apr 2018
9. Mullineaux Corporation has a target capital structure of 70 percent common stock, 5 percent preferred stock, and 25 percent debt. Its cost of equity is 11 percent, the cost of preferred stock is 5 percent, and the pretax cost of debt is 7 percent. The relevant tax rate is 35 percent.
a. What is Mullineauxâs WACC?
b. The company president has approached you about Mullineauxâs capital structure. He wants to know why the company doesnât use more preferred stock financing because it costs less than debt. What would you tell the president?
9. Mullineaux Corporation has a target capital structure of 70 percent common stock, 5 percent preferred stock, and 25 percent debt. Its cost of equity is 11 percent, the cost of preferred stock is 5 percent, and the pretax cost of debt is 7 percent. The relevant tax rate is 35 percent.
a. What is Mullineauxâs WACC?
b. The company president has approached you about Mullineauxâs capital structure. He wants to know why the company doesnât use more preferred stock financing because it costs less than debt. What would you tell the president?
Collen VonLv2
8 Apr 2018