Solution-Calculate the firm weighted average cost of capital

Calculate the firm weighted average cost of capital

Reference no: EM132714429

Question - The market values and after-tax costs of various sources of capital used by Ridge Tool are shown in the following table:

Source of Capital	Market Value	Individual Cost
Long Term Debt	$900,000	7.9%
Preferred Stock	$90,000	9.9%
Common Stock Equity	$450,000	15.3%

Required -

a. Calculate the firm's weighted average cost of capital.

b. Explain how the firm can use this cost in the investment decision-making process.

Reference no: EM132714429

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Calculate the firm weighted average cost of capital

Reference no: EM132714429

Reference no: EM132714429

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Accounting Basics Questions & Answers

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Theory of interest - term structure of interest rates

Write a report on internal controls

Prepare the bank reconciliation for company

Cost-benefit analysis

Theory of interest

Liquidity and profitability

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Simple interest and compound interest

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Assured A++ Grade

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