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Mullineaux Corporation has a target capital structure of 60 percent common stock, 5 percent preferred stock, and 35 percent debt. Its cost of equity is 12%, the cost of preferred stock is 5 percent, and the pre-tax cost of debt is 7 percent. The relevant tax rate is 35 percent.
a. What is Mullineaux's WACC?
b. The company president has approached you about Mullineaux's capital structure. He wants to know why the company doesn't use more preferred stock financing because it costs less than debt. What would you tell the president?
A $1,000 corporate bond with 10 years to maturity pays a coupon of 8% (semi-annual) and the market required rate of return is a) 7.2% and b) 10%. What is the current selling price for a) and b)?
Objective type questions on financial decisions and The investment opportunity scheduled combined with the weighted marginal costs of capital indicates
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Suppose you just received a gift of $500 from your grandmother and you are thinking about saving this money for graduation, which is four years away. You have your choice between Bank A, which is paying seven percent for one-year deposits,
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