FIN 571 Course Great Wisdom / tutorialrank.com FIN 571 Course Great Wisdom / tutorialrank.com | Page 8

32.Mullineaux Corporation has a target capital structure of 65 percent
common stock and 35 percent debt. Its cost of equity is 14 percent,
and the cost of debt is 8 percent. The relevant tax rate is 30 percent.

What is the company’s WACC? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2 decimal
places, e.g., 32.16.)

33.Filer Manufacturing has 8 million shares of common stock
outstanding. The current share price is $50, and the book value per
share is $5. The company also has two bond issues outstanding. The
first bond issue has a face value of $69.4 million and a coupon rate of
6.7 percent and sells for 108.6 percent of par. The second issue has a
face value of $59.4 million and a coupon rate of 7.2 percent and sells
for 108.3 percent of par. The first issue matures in 9 years, the second
in 26 years.

Suppose the company’s stock has a beta of 1.3. The risk-free rate is
2.8 percent, and the market risk premium is 6.7 percent. Assume that
the overall cost of debt is the weighted average implied by the two
outstanding debt issues. Both bonds make semiannual payments. The
tax rate is 40 percent. What is the company’s WACC? (Do not round
intermediate calculations and enter your answer as a percent rounded
to 2 decimal places, e.g., 32.16.)

34.A firm’s WACC can be correctly used to discount the expected
cash flows of a new project when that project:
will be financed with the same proportions of debt and equity as those
currently used by the overall firm.