The market values and after-tax costs of various sources of capital used by Ridge Tool...
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Accounting
The market values and after-tax costs of various sources of capital used by Ridge Tool are shown in the following table: LOADING....
| Source of capital | Market value | Individual cost |
| ||
| Long-term debt | $850,000 | 6.8% | |||
| Preferred stock | $60,000 | 9.7% | |||
| Common stock equity | $500,000 | 14.9% | |||
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.
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