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:

Demand

The amount of a product or service that buyers are prepared and capable of buying at different price levels over a specified time frame.

Price Elastic

Price elasticity refers to the degree to which the quantity demanded of a good or service changes in response to a change in its price.

Availability of Substitutes

The presence of alternative products or services that can satisfy the same needs or wants as the original product.

Own Price Elasticity

Measures the responsiveness of the quantity demanded of a good to a change in its own price.