Mullens estimates that it can issue debt at a rate of rd=20.00% and a tax rate of T=10.00%. It can issue preferred stock that pays a constant dividend of Dp=$5.00 per year and at Pp=$50.00 per share. Also, its common stock currently sells for P0=$25.00 per share. The expected dividend payment of the common stock is D1=$5.00 and the dividend is expected to grow at a constant annual rate of g=5.00% per year. Mullens' target capital structure consists of ws=70.00% common stock, wd=20.00% debt, and wp=10.00% preferred stock. According to the video, the after-tax cost of debt can be stated as . Plugging in the values for rd and (T) yields an after-tax cost of debt of approximately According to the video, the cost of preferred stock can be stated as . Plugging in the values for Dp and Pp yields a cost of preferred stock of approximately Hint: Assume no flotation costs. According to the video, the cost of common stock can be stated as . Plugging in the values for D1,P0, and g yields a cost of common stock of approximately WAAC=(%ofdebt)(After-taxcostofdebt)+(%ofpreferredstock)(Costofpreferredstock)+(%ofCommonequity)(Costofcommonequity) Plugging in the relevant values into the formula for WACC yields a WAAC of approximately Suppose that Mullens will only accept projects with an expected rate of return that exceeds the WAAC. Which of the following projects will Mullens accept? Check all that apply. Project 1 Project 2 Project 3 Suppose Mullens Corparation is cansidering three average -risk projacts with the follawiry costs and rates of return: Mullens estimates that is can issue deht at a rate of rd=2000% and a tax rate of T=10.00%. It can issue preferred stock that pays a constant dividend of DF=$5.00 per year and at Py=$50.00 per share. Nso, its common stock currently sel's for P0=$25.00 per share. The expected dividend payment of the conman stock is D1=$5.00 and the dividend is expected to grew at a constant annual rate of g=5.00% per year. Mullens' target captal structure consists of wk=70.00% common stock, wd=20.00% dabt, and wP=10.00% preferred stock. Accerding to the vides, the after-tax cost of deht can be statod as . Pugging in the values for rJ and (T) yialds an after-tax cosk of debe of appreximately According to the vides, the cost of preferred stock can be statod as - Mugging in the values for Dy and Py yieids a cost of preferred stock of of appreximately Hint: Assume no flatation coses. Accerding to the vides, the cost of cammon stock can be staked as . Plugging in the values for D1,P0, and g viede a cosit of common stack of approximately Decal that the equation for the weighted arerage cost of capital (WiAAC) can be stated as: +(Fofprefermedabok)(Coufofpregerndnow)+(%ofCanunasequiry)(Conofconnusiequiry) Mugging in the relevant values into the formula for WaCC yialds a WAACC of appronimately Supposie that Mullens will anly ascept projects whik an expected rate of retum that exceds the WaAc. Which of the follswing projacts wil Mulens acoept? Check al that agpily. Pruject 1 Pruject 2 Pruject 3
