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WACCBook weights Ridge Tool has on its books the amounts and specific (after-tax) costs shown in the following table for each source of capital: 5 a. Calculate the firm's weighted average cost of capital using book value weights. b. Explain how the firm can use this cost in the investment decision-making process. a. The firm's weighted average cost of capital, ra, using book value weights is %. (Round to two decimal places.) b. Explain how the firm can use this cost in the investment decision-making process. (Select the best answer below.) A. The WACC is the rate of return that the firm must exceed on long-term projects to maintain the value of the firm. The cost of capital can be compared to the dollar value for a project to determine whether the project is acceptable. B. The WACC is the rate of return that the firm must receive on short-term projects to maintain the value of the firm. The cost of capital can be compared to the dollar value for a project to determine whether the project is acceptable. C. The WACC is the rate of return that the firm must receive on long-term projects to maintain the value of the firm. The cost of capital can be compared to the return for a project to determine whether the project is acceptable. D. The WACC is the rate of return that the firm must not exceed on long-term projects to maintain the value of the firm. The cost of capital can be compared to the return for a project to determine whether the project is acceptable. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Source of capital Long-term debt Preferred stock Common stock equity Book value $900,000 $70,000 $550,000 Individual cost 6.6% 11.3% 14.6%

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