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How the firm can use the cost in the investment?

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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%

Problem 1: Calculate the? firm's weighted average cost of capital.

Problem 2: Explain how the firm can use this cost in the investment? decision-making process.

Reference no: EM132802919

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