Problem:
Mullineaux Corporation has a target capital structure of 41 percent common stock, 4 percent preferred stock, and 55 percent debt. Its cost of equity is 18 percent, the cost of preferred stock is 6.5 percent, and the pre-tax cost of debt is 8.5 percent.
Required:
Question: What is the firm's WACC given a tax rate of 39 percent?
A. 9.87 percent
B. 10.43 percent
C. 10.77 percent
D. 13.38 percent
Note: Please show how you came up with the solution.