18) A firm has determined its cost of each source of capital and the optimal capital structure Sources of capital After-tax cost, % Long-term debt Preferred stock Common stock Target market proportions, % 40 10 SO 12 15 Given this information, the weighted average cost of capital is a) 11.33 percent b) 34 percent c) 11.50 percent d) 15 percent and risk 19) Generally, when a firm borrows less, its rate of return a) decreases; increases b) decreases; decreases c) increases, increases d) increases; decreases 20) A firm has $300,000 in EBIT and a tax rate of 40 percent. The firm has an after-tax cost of debt of 5 percent and a cost of equity of 15 percent. The firm's target capital structure is 40 percent debt and 60 percent equity. Assuming this mix represents the optimum capital structure for the firm, the value of the firm is a) $1.8 million b) $2.7 million c) $1.6 million d) $16.4 million