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A firm has determined its cost of each source of capital and optimal capital structure, which is shown below Source of Capital Market Proportions
A firm has determined its cost of each source of capital and optimal capital structure, which is shown below Source of Capital Market Proportions After-Tax Cost Long-term debt 49% 5% Preferred stock 10 14 Common stock equity 45 22 Other things remaining constant, if the firm were to shift toward a capital structure with the weighted average cost of capital will be higher. O 60% long-term debt, 30% common stock, and 10% preferred stock 60% long-term debt, 20% common stock, and 20% preferred stock O 45% long-term debt, 40% common stock, and 15% preferred stock O 20% long-term debt, 60% common stock, and 20% preferred stock
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