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Assume that a firm has the following capital structure and costs: Source of Capital Target Market Proportions Cost for source Long-term debt 40% 7.6% (this

Assume that a firm has the following capital structure and costs: Source of Capital Target Market Proportions Cost for source Long-term debt 40% 7.6% (this is the BEFORE-tax cost) Preferred stock 10% 11.2% Common-stock equity 50% kRE = 14.3% ks = 15.2% The firm has a tx rate of 40%. The firm has $1,000,000 of retained earnings available. What is the weighted average cost of capital up to the point when retained earnings are exhausted (the cost when you are using retained earnings for the common-stock equity portion of the target capital structure?

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