### Computation of the weighted average cost of capital

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Computation of the weighted average cost of capital

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% 6% Preferred stock 10 11 Common stock equity 50 15

What is the weighted average cost of capital of the firm?

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