1) Mullineaux Corporation has a target capital structure of 65 percent common stock, 10 percent preferred stock, and 25 percent debt. Its cost of equity is 11 percent, the cost of preferred stock is 6 percent, and the pretax cost of debt is 8 percent. The relevant tax rate is 34 percent.

a.	What is the companys WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

WACC

%

b.	What is the aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Aftertax cost of debt

%

2) Consider the following information:

State of Economy	Probability of State of Economy			Portfolio Return If State Occurs
Recession		.15			.22
Normal		.51			.17
Boom		.34			.31

Calculate the expected return. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected return

%