A firm has determined its optimal structure which is composed of the following sources and target market value proportions. Target Market Source of Capital Proportions Long-term debt Common stock equity 40 60% Debt: Cost of debt pre tax (including flotation costs) is 10% Common Stock: Cost of common stock (internally generated equity) is 14% Tax rate is 25%. 11.6 percent 10.2 percent 8.7 percent 10.1 percent