A firm has determined its cost of each source of capital and optimal capital structure,...
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A firm has determined its cost of each source of capital and optimal capital structure, which is composed of the following sources and target market value proportions. Assume tax rate is 10% Target market Source of capital proportions After-tax cost Short-term debt 15% 5% Long-term debt 25% 6% Preferred stock 10% Common stock equity 50% 15% The weighted average cost of capital is 10.85% 15% 11.88%
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