Mullineaux Corporation has a target capital structure of 55 percent common stock, 10 percent preferred stock, and 35 percent debt. Its cost of equity is 10 percent, the cost of preferred stock is 5 percent, and the pretax cost of debt is 7 percent. The relevant tax rate is 35 percent.
a. What is the company’s WACC?
b. What is the aftertax cost of debt?