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Calculate the firm weighted average cost of capital

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Reference no: EM132880520

Question - WACC Source of capital Market Value Individual Cost - Market value weights The market values and after-tax costs of various sources of capital used by Ridge Tool are shown in the following table:

Long-term debt $700,000 5.3%

Preferred stock $50,000 12.0%

Common stock equity $650,000 16.0%

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: EM132880520

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