46. Promo Pak has compiled the following financial data:

Source of Capital	Book Value	Market Value	Cost
Long-Term Debt	$10,000,000	$8,500,000	5.0%
Preferred Stock	1,000,000	1,500,000	14.0%
Common Stock Equity	9,000,000	15,000,000	20.0%
	$20,000,000	$25,000,000

a. Calculate the weighted average cost of capital using the book value weights.

b. Calculate the weighted average cost of capital using the market value weights.

T/F

______ 3. In using the cost of capital, it is important that it reflects the historical cost of raising funds over

the long run.