QUESTION 19 A firm has determined its cost of each source of capital (before considering tax) and optimal capital structure, which is composed of the following sources and target market value proportions: Source of Target Market Pre-tax Capital Proportions (%) cost (%) Long-term 40 6 debt Preferred 10 11 stock Common 50 5 stock The firm's marginal tax rate is 40%. The weighted average cost of capital is 6 percent 7.33 percent 11 percent O 15 percent 5.04 percent QUESTION 20 (Recall the DuPont equation). Afirm with a low return on total assets (ROA) can improve its return on equity (ROE), all else remaining the same, by Increasing its debt ratio Increasing its total asset turnover O decreasing its debt ratio decreasing its total asset turnover