Mullineaux corporation has a target capital structure of 70 percent common stock and 30 percent debt. its costs of equity is 15 percent, and the cost of debt is 8 percent. the relevant tax rate is 35 percent. what is mullineaux's wacc? common stock weight = 70%debt weight = 30%cost of equity = 15%cost of debt = 8%tax rate = 35%wacc= ?

12.06%

Explanation:

The formula to compute WACC is shown below:

= Weightage of debt × cost of debt × ( 1- tax rate) + (Weightage of  common stock) × (cost of common stock)

= (0.30 × 8%) × ( 1 - 35%) +  (0.70 × 15%)

= 1.56% + 10.5%

= 12.06%

Simply we multiply the cost of each capital structure with its weightage so that the correct weighted average cost of capital can come

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