Maxs Corporation has a target capital structure of 61 percent common stock, 6 pe
ID: 2765336 • Letter: M
Question
Maxs Corporation has a target capital structure of 61 percent common stock, 6 percent preferred stock, and 33 percent debt. Its cost of equity is 12.6 percent, the cost of preferred stock is 5.6 percent, and the cost of debt is 7.3 percent. The relevant tax rate is 34 percent.
What is Mullineaux’s WACC? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places
WACC %
Required: (a)What is Mullineaux’s WACC? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places
WACC %
Explanation / Answer
Ans:- Required to calculate the company's weighted average cost of capital(WACC).
WACC = rD (1- Tc )*( D / V )+ rE *( E / V )
WACC = .61(0.141) + 0.06(0.071) + 0.33((0.088 * (1 - 0.34))
= 0.086010 + 0.004260 + 0.019166
= 0.109436
=10.94%