2.) A firm has determined its cost of each source of capital and optimal capital structure which...

2.) 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 35% 9%

Prefferred Stock 10 14

Common Stock Equity 55 20

The firm is consdering an investment opportunity, which has an internal rate of return of 10 percent. The Project

a) should not be considered because its internal rate of return is less that the cost of long term debt

b) should be considered because its internal rate of return is less that the cost of long term deb

c) should not be consdered because its internal rate of return is greater that the weighted average cost of capital

d) should be consdered because its interal rate of is greater that the weighted average cost of capital