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:

Source of Capital Target Market Proportions After-Tax Cost

Long-term debt 40% 4%

Preferred stock 10 9

Common stock equity 50 13

The weighted average cost of capital is ____________.

	a.	9 percent
	b.	11 percent
	c.	10.7 percent
	d.	13 percent