Mullineaux Corporation Has a Target Capital Structure of 41 Percent

question 24

Multiple Choice

Mullineaux Corporation has a target capital structure of 41 percent common stock,4 percent preferred stock,and 55 percent debt.Its cost of equity is 18 percent,the cost of preferred stock is 6.5 percent,and the pre-tax cost of debt is 8.5 percent.What is the firm's WACC given a tax rate of 39 percent?

• A)9.87 percent
• B)10.43 percent
• C)10.49 percent
• D)13.38 percent
• E)15.17 percent

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Definitions:

Alpha/Beta

Measures in finance; Alpha represents the strategy's returns above the benchmark, whereas Beta indicates the volatility relative to the market.

Sharpe Measure

A measure of the excess return (or risk premium) per unit of risk in an investment asset or a trading strategy, calculated as the difference between the asset's returns and the risk-free rate, divided by the asset's standard deviation.

Forecasting Ability

The capability to predict future trends, prices, or outcomes based on historical data, trends, and analysis.

Tracking Error

The difference between the return on a managed portfolio and that of a benchmark portfolio against which the manager is evaluated.